Court rules power agreement between Florida and Georgia utilities is valid

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A federal judge affirmed the validity of the power purchase agreement between Georgia's joint action agency, MEAG Power, and JEA, the municipal utility owned by Jacksonville, Florida.

The 20-year, take-or-pay PPA requires JEA to pay debt service on bonds and U.S. Department of Energy-backed loan guarantees issued to pay a portion of MEAG's stake in two nuclear reactors under construction at Plant Vogtle in Georgia.

A power purchase agreement between Florida's JEA and Georgia's MEAG is valid, a federal judge has ruled.

U.S. District Judge Mark Cohen ruled Wednesday the PPA is "valid and enforceable," after rejecting numerous arguments by JEA and Jacksonville about why the contract should be abrogated, including some that challenged Georgia's bond validation law.

"The judgments of bond validation proceedings in Georgia are not subject to such challenges," Cohen said in a 53-page decision. "The Georgia Supreme Court 'has held consistently that [the Revenue Bond Law] prevents any collateral attack' on the validation proceedings by the parties specified in the statute."

Cohen also rejected the city’s arguments that JEA didn't have the authority to enter into the PPA.

JEA officials will evaluate their options following the ruling, which include whether to appeal, a spokeswoman said.

“From the beginning, we have simply argued that the PPA is valid and fully enforceable, and that the suit brought by JEA and the city of Jacksonville was meritless,” said MEAG Power President and Chief Executive Officer James E. Fuller. “Judge Cohen’s ruling was very thorough and perfectly clear — JEA and the city of Jacksonville knew what they were doing when they entered into this agreement, and they have to honor their commitment.

“We look forward to Vogtle units 3 and 4 coming into service as planned in 2021 and 2022, respectively,” Fuller added. “We will continue to honor all of our commitments, as we always have, and are hopeful that this ruling puts this matter behind us.”

The case is far from over. Both parties have counterclaims to litigate and will now prepare for trial.

"The court instructed the commencement of discovery on JEA’s counterclaims," the utility's spokeswoman said. "These claims seek to recuperate damages resulting from MEAG’s failure to exercise reasonable care when it voted to continue construction of the project. JEA will pursue these claims going forward."

JEA contends that after the PPA was executed the situation changed "dramatically" for the worse, the project was delayed multiple times and construction costs "skyrocketed out of control beyond anyone's reasonable expectation." JEA also argues other sources of energy became more economical than completing the Vogtle project.

"As a result of these occurrences, it made far more sense to abandon or at least shutter the project and pay the accrued costs rather than continue to throw good money after bad completing the project," JEA attorneys argued.

When MEAG and other co-owners of the project voted to continue building the reactors, MEAG had a duty to "exercise reasonable care," said JEA, adding the vote to continue with it was to JEA’s detriment.

"JEA is therefore entitled to damages for all harm caused by MEAG’s failure to exercise due care in an amount to be proven at trial, including but not limited to all PPA payments made by JEA following the September 2018 vote to continue" with the project, JEA said.

MEAG's counterclaim against JEA is for breach of contract. The intent of the PPA was that JEA would abide by "the representations it made regarding its own authority to enter into the contract, in order to aid the construction financing efforts," MEAG said.

JEA acted to the contrary by urging MEAG Power and the co-owners to abandon the Vogtle project, by repudiating JEA's authority to enter into the PPA, and by "falsely asserting that it could not perform" its obligations without violating Florida law, MEAG said.

"JEA sowed and stoked fear and uncertainty in the bond market and with DOE," MEAG contended. "JEA’s actions have resulted in substantially higher financing and other costs to MEAG Power."

MEAG said it is requesting damages for "all harm" caused by JEA for breaching the terms of the PPA, and is requesting a court order requiring JEA to perform its obligations.

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Municipal utility districts Revenue bonds Lawsuits JEA Municipal Electric Authority of Georgia Florida Georgia