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Tuesday, December 06, 2016

Ind. Decisions - 7th Circuit decides dispute between Benton Co. wind farm and Duke re wind-generated power

In Benton County Wind Farm LLC v. Duke Energy Indiana, Inc. (SD Ind., Barker), a 26-page opinion, including an 11-page concurring opinion, Judge Easterbrook writes:

In 2005 Duke Energy Indiana offered to buy 100 megawatts of renewable energy at a price high enough to enable potential sellers to finance the construction of wind turbines. As part of the deal Duke would acquire renewable-energy credits that buyers or generators of wind energy can trade or sell to other utilities that lack wind generation. Benton County Wind Farm (Benton) accepted Duke’s offer and built a 100-megawatt facility that became operational in 2008. The contract between Duke and Benton requires Duke to pay Benton for all power delivered during the next 20 years. Duke does not have its own transmission lines in Benton County, and the contract requires Benton to deliver to lines owned by Northern Indiana Public Service Company (NIPSCO) or some other place designated by the regional transmission organization, the Midcontinent Independent System Operator (MISO). * * *

Potential buyers and sellers of electricity could and did foresee when negotiating this contract (and others like it) that electrical grids may be swamped by new sources of renewable power, which usually is located far from the centers of demand. They needed to allocate the risk of that development, which predictably would compel MISO to alter its rules for which sources could put power on the grid. Allocating the risk to Benton would have made it hard, perhaps impossible, to finance the project’s construction, while leaving Duke and similar utilities no incentive to expand the regional grids as wind power became available. Allocating the risk to Duke facilitates both construction of renewableenergy sources and better incentives to match the size of the transmission grid to the capacity for local generation. We read this contract as allocating the risk to Duke, which means that Benton receives the compensation provided by §4.6(a) and Duke has the right incentives to build or buy extra transmission capacity. * * *

The judgment is reversed, and the case is remanded with instructions to determine the relief to which Benton is entitled.

[p. 15] POSNER, Circuit Judge, concurring. I agree with the deci‐ sion to reverse the judgment of the district court and remand for a calculation of damages. But I think the majority opin‐ ion’s analysis could be simplified, and in addition I disagree with the majority’s discussion of damages for the breach of the second contract. * * *

I trust that on remand the district judge will be conscious of the “long tradition in contract law of reading contracts sensibly,” not as “parlor games but [as] the means of getting the world’s work done.” Beanstalk Group, Inc. v. AM General Corp., 283 F.3d 856, 860 (7th Cir. 2002), quoting Rhode Island Charities Trust v. Engelhard Corp., 267 F.3d 3, 7 (1st Cir. 2001).

Posted by Marcia Oddi on December 6, 2016 05:06 PM
Posted to Ind. (7th Cir.) Decisions