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Prescott, Ark., sues SWEPCO in Federal Court

Prescott, Ark., sues SWEPCO in Federal Court

April 15th, 2019 by Lynn LaRowe in Texarkana Region

A federal lawsuit on behalf of the City of Prescott, Ark., and others accuses SWEPCO of misconduct that has resulted in the continuing accrual of millions in fees associated with the transmission of electricity.

SWEPCO officials could not be immediately reached for comment and has not yet filed a response to the complaint filed 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 a customer of Prescott Water and Light Company. The plaintiffs represent three types of electric consumers: residential, commercial and industrial.

SWEPCO did not immediately respond to a request for comment.

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, filed earlier this month. 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 beginning in January 2009.

According to the complaint, SWEPCO's agreement included not only the delivery of electricity to the city of Prescott but to 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, SWEPCO allegedly declined to build a Prescott substation and Prescott's power was routed through an Entergy substation already existing in the area.

In 2012, changes at Entergy led to concern that Prescott and the City of Hope, Ark., which is not a plaintiff to the suit, would be subject to "rate pancaking and congestion" charges as the energy SWEPCO sold to the cities crossed multiple ETS or energy transmission systems. The city filed objections to the proposed changes for Entergy which they later withdrew at SWEPCO's request and with SWEPCO's assurances that the feared fees would not materialize.

SWEPCO allegedly agreed in 2012 that it would construct a substation in Prescott which would eliminate the need for Prescott to use Entergy's substation.

The complaint alleges that the city's fears were realized in 2014 when Prescott's bill for the wholesale electricity it provides to its electric company customers began to include "substantial" transmission charges. SWEPCO allegedly reneged on its promise to build a Prescott substation, with SWEPCO President Venita McCellon-Allen telling the city that the SWEPCO representatives who'd agreed to the construction lacked the authority to make such promises.

"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. Thereafter, even though Prescott's use of the Entergy Substation and load purchase remained consistent, the costs increased dramatically," the complaint states.

The city filed a complaint with the Federal Energy Regulatory Commission's Dispute Resolution Division to attempt to work out the problem with SWEPCO and eliminate the "rate pancaking charges," in February 2016. In the same year, Prescott was approached by a different company offering to replace AEP/SWEPCO as Prescott'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 got wind that Prescott might be taking its business elsewhere, it allegedly resumed discussions regarding the rate pancaking problem. SWEPCO allegedly made promises to Prescott and Hope in January 2017 that led to an end of talks with GridLiance. 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.

But to do that, SWEPCO, as the city's agent, had to request a study which it has allegedly refused to do. Without SWEPCO's cooperation, Prescott allegedly cannot move to a wholesale electric supplier with the Midwest System Operator Regional Transmission Organization.

In late 2017, SWEPCO allegedly attempted to alleviate the problem by promising Prescott that the increased charges would be reduced through SWEPCO's purchase of an Oklahoma wind farm. In 2018, SWEPCO scrapped its plan to purchase the wind farm, the complaint states.

"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 alleges several causes of action against SWEPCO including detrimental reliance, breach of fiduciary duty and negligence. The complaint asks for damages in an amount to cover the $3,286,565 Prescott alleges it has paid in fees because of SWEPCO's misconduct plus any additional fees incurred from January 2019 forward. The plaintiffs are also seeking court costs and attorney fees.

The plaintiffs are represented by the Barber Law Firm of Little Rock and the McKenzie, Vasser and Barber firm of Prescott. The suit is assigned to U.S. District Judge Susan Hickey. SWEPCO has not yet filed a response to the complaint.



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