Wolf Hollow plant cannot recover replacement power costs from gas supplier

The Texas 14th Court of Appeals has ruled that Wolf Hollow I LP cannot recover replacement power damage in a long-running dispute with its natural gas supplier.

The Texas appeals court made the ruling July 2 in a case on remand from the Texas Supreme Court. The case is Wolf Hollow versus El Paso Marketing LP and Enterprise Texas Pipeline LLC.

The Wolf Hollow, natural gas power station, located in  Hood County, Texas, is owned by Exelon (NYSE:EXC). Exelon is also in the process of developing a new combined-cycle facility at Wolf Hollow that would more than double the capacity of the existing 700-MW Wolf Hollow station.

“After many years of litigation, including two trips to the Texas Supreme Court, there is still one question that remains to be decided in this complex contract dispute: Can Wolf Hollow recover replacement-power damages in its gas-quality claims against El Paso? Our answer is ‘no,’” the appeals court said.

“Because the trial court reached the same conclusion but through an erroneous declaratory judgment, we vacate the judgment in part and affirm the judgment in part and affirm the judgment as modified,” the appeals court said.

Between 2006 and 2007, Wolf Hollow experienced four interruptions in the delivery of gas to its plant. “One of the interruptions was caused by an Enterprise technician whose computer error triggered safety valves to automatically half the flow of gas to the plant,” the opinion noted.

The other three interruptions were caused by equipment failures on the Enterprise pipeline.

El Paso notified Wolf Hollow of the interruptions and asserted they were force majeure and excused under the supply agreement. Wolf Hollow contested this and also complained that about poor quality gas from El Paso on various occasions.

As a result, Wolf Hollow said, the plant had to be shut down and costs were incurred for purchasing replacement power and for cleaning and upgrading the plant’s equipment.

Extensive litigation ensued on various aspects of the contract agreements between the parties.

In its latest ruling the 14th Circuit said that the Supreme Court “reinforced our interpretation of the supply agreement when it said that there is a ‘three-step procedure’ for recovering replacement power costs, the appeals court said.

The appeals court held that “the trial court did not err in granting summary judgment for El Paso on Wolf Hollow’s claim for replacement power damages under Article XXI,” of the contract.

A link to the opinion for No. 14-09-00118-CV can be found at http://law.justia.com/cases/texas/fourteenth-court-of-appeals/2015/14-09-00118-cv.html.

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.