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Lawsuit could increase construction cost of power plant

January 01, 2011|By WILLIAM ROLLER | Imperial Valley Press Staff
  • FROM LEFT: Imperial Irrigation District officials Mike Taylor and Henryk Olstowski stand at the site of the Heat Recovery Steam Generator in El Centro in July.

A lawsuit filed against the Imperial Irrigation District could cost the district substantial money to finance a power generation plant already under construction.
Jeff Garber, IID general counsel, said the action against the district by Mike Morgan and Foster Feed Yard Inc. was filed in July. The case against IID aims to stop two resolutions that help the district to sell bonds to fund the building of the El Centro Unit 3 power generation plant, Garber said. Unit 3 is a 144-megawatt plant located on Dogwood Road, costing $254 million. One megawatt is capable of powering 700 homes.
“It’s hard to figure out why they are suing,” Garber said. “Their point is to say the resolutions are invalid.”
Morgan and Foster maintain the resolutions are invalid because they are in violation of Proposition 218, Garber said. Prop. 218 is an amendment to the California Constitution that applies to property related fees and assessments.
But Superior Court Judge Jeff Jones ruled on Dec. 7 there is no violation to Prop. 218 in regard to the IID’s resolution.
In addition, Morgan and Foster allege that IID may have other debt which could cause future limits to water services, Garber said. Also, IID debt could increase water rates, which could affect landowners and thus landowners might have rights that may be affected by the financing, he added.
“This financing was to happen in the late summer but now the market has indicated to IID they will not accept the bonds with a lawsuit pending,” Garber said. “These bonds were a good source of financing at a reasonable cost.”
The concern is IID has lost this opportunity and now other funding sources will be more expensive and as a result cost more to IID and ratepayers, Garber said, adding that the suit is frivolous and there is no legitimate reason for filing the action.
“I don’t know what their objective is other than harming the IID,” Garber said.
In a previous Imperial Valley Press story Morgan and Foster said IID debt will reduce the value of their electrical assets and prevent the sale of IID’s Coachella Valley power division. The plaintiffs contend revenue from the sale should fund Salton Sea restoration, according to the complaint.
But John Pierre Menvielle, an IID board director, said Morgan and Foster want to break the back of the IID financially. Their real goal is to split the water and power divisions and sell off the power side and have the water board controlled by landowners, he added.
“It all comes down to controlling water rights and the general public be damned,” Menvielle said. “It could cost the IID another $80 (million) to $120 million by the bond being delayed.”
Trial is scheduled for March 14.

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