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Sunflower challenge cost tops $1 million

Published 11/20/2008 in News

By CHRIS GREEN

cgreen@dailynews.net

TOPEKA (HNS) — Sunflower Electric Power Corp. representatives are calling the more than $1 million in spending on legal fees the price of defending the cooperative’s legal rights.

The Hays-based utility is in a legal fight over state regulator’s decision against the two coal-fired power plants proposed for southwest Kansas.

Sunflower President and Chief Executive Officer Earl Watkins states that Sunflower has spent about $1.135 million in attorneys’ fees and expenses in prosecuting administrative and judicial appeals of Health and Environment Secretary Rod Bremby’s ruling last year.

The figures come from a sworn affidavit given by Watkins in the newly filed federal lawsuit against the administration of Gov. Kathleen Sebelius.

Sunflower spokeswoman Clare Gustin said it was unfortunate that the utility must spend the money to defend its legal rights to equal treatment under the law and to conduct lawful business.

“At a time of state budget shortfalls and other industry layoffs, we could have a plant under construction putting Kansans to work while contributing to the Kansas economy, instead of being forced to defend our legal rights,” Gustin said.

But Stephanie Cole, a spokeswoman for the Kansas Sierra Club, questioned the effort.

“It’s a risky project,” Cole said. “Why they’re spending so much on it, we don’t know.”

Bremby denied air-quality permits for Sunflower’s $3.6 billion expansion near Holcomb in October 2007, citing concerns that the plants’ carbon dioxide emissions would contribute to global warming.

The Hays-based utility, already pursuing state-level legal challenges, is now asking a federal court to force state officials to allow Sunflower’s plans to construct two 700 megawatt, coal-fired generators near Holcomb.

The company’s filing contends that Sebelius, Bremby and Lt. Gov. Mark Parkinson opposed the permits to further their “individual political fortunes by catering to the environmental lobby” that opposes the plants.

It also notes that the Sebelius Administration hasn’t blocked any other project over concerns about CO2 emissions.

Benefits and costs

Gustin said rural electric cooperative customers in central and western Kansas would also receive $750 million in benefits from the project. That’s because of development and rental fees, as well as economies of scale that result from having a larger Holcomb complex, she said.

“The $1.13 million is a cost of gaining the $750 million benefit for ratepayers in central and western Kansas,” Gustin said.

But Cole notes that the utility itself acknowledges that the bill for building the plants continues to rise. In its lawsuit, Sunflower claims that the projected costs of constructing the plants have gone up by more than 60 percent in the last two years. Sunflower expects construction costs to continue to rapidly escalate, the filing states.

“If Sunflower does not obtain the permit necessary to authorize construction of the Power Plants in the very near future, the cost of construction may well increase to the point that the Project cannot be financed at all,” the company’s lawsuit states.

According to the filing, Sunflower has also spent $1.42 million in consultants’ and attorneys’ fees to prepare and file the unsuccessful permit application for its expansion with the Kansas Department of Health and Environment.

A nonprofit utility made up of six smaller electric cooperatives in central and western Kansas, Sunflower expects to derive $205 million in development fees, operating fees and other benefits from the construction and operation of the new coal plants.

Those fees, as well as revenues from the sale of Sunflower’s 200-megawatt share of power from the project, “will provide a reasonable assurance of repayment of the debt to the lenders” who will finance Sunflower’s part of the project, Watkins states in the filing.

“Without the fees associated with the development, construction and operation of the Project, Sunflower likely would not have the ability to finance its interest in the Project,” Watkins states.

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