Archive for Wednesday, February 28, 2001

Lawsuit faces appeal

February 28, 2001

OTTAWA Baldwin City residents probably have more of a chance of getting money back from the Internal Revenue Service than the city anytime soon.

District Judge James Smith last Wednesday dismissed a $1.4 million lawsuit brought by Baldwin and six other cities against the Kansas City Board of Public Utilities.

Smith's ruling came two days into a jury trial scheduled for four days. He said the Kansas Municipal Energy Agency, which represented the cities, failed to prove that BPU overcharged the cities for electricity during July and August 1999.

BPU purchased power on the open market for its municipal customers after a fire on a coal conveyor forced closure of the BPU Nearman power plant for nearly a month in 1999.

Baldwin was charged up to $2,400 per megawatt hour during peak times, compared to the normal price of about $50 per megawatt hour. Terry McKinney, Baldwin's director of utilities, testified to that.

To pay for the unexpected $300,000 electric bill, Baldwin took out a "no fund warrant" and paid off the loan with the help of rate payers, who paid a monthly surcharge for a year.

During the two days of trial, KMEA attorney Ed Peterson claimed BPU had violated parts of its contract by charging the higher rates.

BPU attorney Kelly Sears argued that the KMEA failed to prove its case and offered a motion to dismiss the suit.

"Sears argued that the opposite side hadn't proved its case, and the judge bought the argument," said Baldwin City Administrator Larry Paine.

Paine said the defense routinely seeks dismissal of a case after the plaintiff presents its arguments. However, it is unusual when the motion is accepted.

Paine said he was surprised by the judge's ruling, because he thought the case was favorable for the cities before it was dismissed.

"Last Tuesday morning, I didn't see us doing real well," Paine said. "Right after lunch, momentum switched."

So now Baldwin and the other cities involved have the option of appealing the case. Paine said that is a decision yet to be made.

Baldwin City Council members and the public will have the chance to hear more about the case and give input during the city council meeting at 7:30 p.m. Monday at the Baldwin City Public Library meeting room. City attorney Bob Bezek plans to attend the meeting.

Paine said his concern is as a rate payer, as well as the city administrator.

"It is going to cost us money to do the appeal," Paine said. "And the question is 'Will we get back our surcharges?'"

The city planned to refund customers' surcharges had the judge ruled in favor of the cities.

Paine said it would cost about $10,000 between all the cities to appeal. He didn't know how much the case had cost the city so far. He said KMEA has paid most of the legal fees, and that a bill has not been received from Bezek.

"We have to look at the economics of this," Paine said. "We have to look at how the legal structure will work. If these two things are positive, Baldwin City will have to decide if we are in or out."

Paine said the case could be appealed as a coalition of the original seven cities, or any combination of the cities. The other cities are Ottawa, Fredonia, Mulvane, Neodesha, Osawatomie and Winfield.

A successful appeal would more than likely land the case back in Franklin County District Court. That didn't concern Paine.

"Judge Smith was tough on both sides," Paine said. "He was impartial. That's what you want from a judge."

Baldwin has a 40-year contract with BPU that started in 1982. Despite the "difference of opinion" over parts of the contract, Paine said it's power the city wants to keep.

"If we lost BPU power, we'd be in a hurt during summer time," he said. "If gives us flexibility."

However, the problem with the contract still remains.

"That particular problem still exists in the contract," Paine said. "We haven't gotten to the point that we understand what can happen to us in an emergency situation which is a significant liability for us at the moment."

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