Victorville settles power plant suit for $54m

Victorville, Calif., has settled litigation over a failed power plant project for $54m, the city announced recently.

Victorville City officials announced Nov. 9 that a settlement has been reached with Carter & Burgess, a firm that is now part of Jacobs Engineering (NYSE: JEC).

Victorville said it would use much of the money from the financial settlement to reduce debt burden of bonds issued for the plant construction.

Victorville still has a 550-MW natural gas and solar energy project “on hold” pending better market conditions. Victorville still hopes to see the latter power project get built and has retained a private partner to help Victorville bid for a contract with the Los Angeles Department of Water and Power, said Victorville City Manager Doug Robertson.

As for Carter & Burgess, it originally brought suit against Victorville in 2008 for $107,000 in unpaid fees. The City of Victorville countersued on several causes of action.

“Following a seven week trial the jury awarded the city the entire amount requested and denied Carter & Burgess’ request for back fees. Subsequently, the judge awarded $1,775,539.50 in attorney’s fees and $107,778.51 in costs bringing the total award to $53,999,684.01,” according to a Victorville news release.

Carter & Burgess appealed the decision but ultimately made several offers to settle the matter over the last few months. After careful consideration over a series of closed session meetings, the City Council ultimately voted to accept an offer that guaranteed the recovery of all costs awarded by the court.

The award had been earning interest that is forgiven under the settlement. The city could have held out for the additional interest, however, the risk of an adverse decision at the appellate court was too great to walk away from the full cost recovery offer.

The settlement will be used in large part to eliminated debt. The first $30m will go to reduce the debt burden of bonds issued for the plant construction. The remaining $24m will be used to repay approximately $22.5m in inter-fund borrowing between the Victorville Municipal Utility Services (VMUS) fund and the Victorville Water District. The Victorville Water District will in turn repay approximately $20m in additional internal borrowing.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.