In a confidential arbitration, a three-arbitrator panel ruled in favor of our client, the owner of a Texas electric power plant, and rejected over $65 million in claims brought by a power purchaser under a long-term power purchase agreement. The purchaser and part-owner of the plant had raised numerous challenges to our client’s administration of the agreement, including calculation of the monthly reservation payment, pass-through of costs, and charges for property taxes assessed on the facility. The dispute arose in the context of the dramatic decrease in the price of natural gas following the shale-gas revolution, which greatly impacted the economics of the electricity-generation business.
Both parties sought declaratory relief, seeking interpretation of the complex and long-term purchase agreement’s provisions relating to the calculation of the reservation payment, adjustments for plant capacity reductions and downtime, and pass-through of property tax costs. We secured an important early victory in the arbitration on the property tax issue through a dispositive motion prior to the hearing. Following discovery and extensive pre-hearing briefing, a one-week arbitration hearing addressed the remaining issues.
The Panel ruled in favor of our client on all the significant claims in the arbitration. In post-hearing briefing, we also secured a favorable attorney’s fee award that more than offset the limited recoveries that the purchaser had made during the dispute concerning ancillary issues.