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June 2012
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Lawsuit accuses power provider of misleading town

BY DAVID ZOELLER dzoeller@paducahsun.com

A class-action lawsuit was filed Tuesday on behalf of electric ratepayers of the city of Batavia, Illinois, alleging misrepresentation relating to the city's involvement in the Prairie State Energy Campus.

According to Michael Duffy, an attorney of Childress Duffy, Ltd., the nine named plaintiffs, who are residents and/or business owners in Batavia, believe that various consultants for the project gave misleading information about Prairie State to city officials.

"Based on current available information, our clients believe that the resulting contract is causing a substantial increase in electric rates and sales tax in Batavia," Duffy said. "The class action filed is twofold; it alleges negligent misrepresentation by five consultants to Batavia and names 19 other entities as respondents in discovery."

In Kentucky, Paducah and Princeton rely on Prairie State as their primary source of electricity. The Sun reported Sunday that power customers in the two towns are paying rates that are well above rates in most other communities in the state and possibly the highest in the commonwealth. 

Prairie State developer Peabody Energy sold all but 5.06 percent interest in the project to eight municipal power generation and transmission entities. Included in that group is the Kentucky Municipal Power Agency, which is comprised of Paducah Power System and the Princeton Electric Plant Board, which owns 7.82 percent of Prairie State.

A number of Peabody entities and municipal power agencies, including KMPA, are among those named as respondents in discovery, according to Duffy.

Illinois law allows the plaintiffs six months to investigate the matter and decide if they want to add any of the respondents in discovery as defendants in the case, Duffy said.

The suit alleges misrepresentations with respect to the construction, operation and other aspects of Prairie State Energy Campus and the cost of electricity generated there; negligent investigation into the financial risks associated with the project, specifically the equipment and operation of the generating plant; and negligent investigation into financial risks associated with it, specifically the quantity and quality of the coal at Prairie State.

"I'm not surprised that a lawsuit was filed," said Dave Clark, Paducah Power System general manager. "Environmental groups have used the court system since the inception of the Prairie State project to try to keep the plant from being built, and now it appears they are using ratepayers who are desperate for relief in their latest attempts to shutter the plant."

Clark, who is also a Prairie State board member, said Prairie State and its owners "categorically deny the lawsuit's allegations." He also said Paducah Power and KMPA have never used the consultants named in the lawsuit.

According to Clark, in 2007, the city of Batavia purchased more than twice the capacity of Prairie State that it needed in anticipation of a large industrial prospect that did not materialize when the economy soured, leaving it with a costly situation regardless of the performance of the plant.

Regarding the allegations that Batavia was misled and misinformed about its Prairie State investment, Clark said, "the (Prairie State) owners believe the law firm leading the suit is working with the Institute for Energy Economics and Financial Analysis as their public relations efforts relating to the class action lawsuit have coincided. The IEEFA is an anti-coal organization that receives funding from the Rockefeller Family Fund and former New York Mayor Michael Bloomberg, both of which sponsor anti-coal campaigns."

The consultants named as defendants in the lawsuit include Indiana Municipal Power Agency, an Indiana joint power agency, IMPA Service corporation, an Indiana corporation, Rajeshwar G. Rao, an Indiana resident, Sargent & Lundy, L.L.C., an Illinois limited liability company, and Skelly and Loy, Inc., a Pennsylvania corporation.

Though attorneys general in Ohio, Illinois and Kentucky have been asked to pursue legal action in connection with Prairie State, no action has been taken by any state agency.

Contact David Zoeller, a Paducah Sun staff writer, at 270-575-8676.

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