United States District Court, D. Minnesota
J. Blando, Esq., Jared M. Reams, Esq. and Eckland &
Blando, LLP, counsel for plaintiff.
Charles H. Salter, Esq., Jane N.B. Holzer, Esq. and Hennepin
County Attorney counsel for defendant.
S. Doty, Judge United States District Court
matter is before the court upon the partial motion to dismiss
by plaintiff Covanta Hennepin Energy Resource Co., LLC. Based
on a review of the file, record, and proceedings herein, and
for the following reasons, the court grants the motion.
background of this matter is set forth in the court's
previous orders [ECF Nos. 23 & 38] and will not be
repeated here except as necessary. For many years, Covanta
has managed and operated the Hennepin Energy Recovery Center
(HERC) under the parties' service agreement, the most
recent version of which expires on March 2, 2018 (Service
Agreement). The County sells energy produced at the HERC to
Xcel Energy - formerly Northern States Power (NSP) - under a
power purchase agreement (PPA). Under the Service Agreement,
Covanta agreed to perform the County's obligations under
the PPA as follows:
The Company shall at all times during the Term of this
Agreement, as agent for the County, perform all of the
County's obligations under the [PPA] and shall enforce
the terms of such agreements in accordance with good business
judgement [sic], and shall otherwise act under such
agreements in a manner designed to maximize Energy Sales
Revenues under this Agreement.
Agreement, Art. 9.01. The County receives two-thirds of the
revenue generated by sales under the PPA and Covanta receives
the remaining one-third. Id. Sched. E at E-12.
the PPA, the County - and thus Covanta - agreed to sell Xcel
“all energy produced or generated by the [HERC] up to
the Committed Capacity ... less the electric power and
electric energy necessary for the operation of the [HERC]
subject to the provisions of Article V
hereof.” PPA Art. 2.01(b). “Committed
Capacity” is defined as the “amount of electrical
capacity expressed in kilowatts (kw) rounded to the nearest
100 kw specified by [the County] ... to be used in evaluation
of [the County's] performance under Article 2 and [the
rate schedule].” Id. Art. 1.06.
rate paid by Xcel, and the amount the County and Covanta earn
under the PPA, depends on several factors. Relevant here, the
PPA establishes a “Committed Capacity Rate” based
on a “Billing Capacity Factor.” Id.
Sched. II § 3(a). The Billing Capacity Factor is the
“arithmetic average of the current and 23 previous
Monthly Capacity Factors.” Id. § 3(c).
When the Billing Capacity Factor is less than 70%, the County
receives a reduced rate for the energy produced by the HERC.
Id. § 3(a).
had hoped to renew the Service Agreement before its upcoming
expiration. In 2016, however, the County decided to contract
with a third-party, GRE HERC Services, which will assume
Covanta's role after the Service Agreement
September 15, 2016, Covanta filed this suit alleging that the
County breached the Service Agreement in its handling of the
negotiations which ultimately led to the Agreement's
non-renewal. After being denied injunctive relief by the
court, Covanta filed an amended complaint. The court denied
the County's subsequent motion to dismiss, after which
the County filed an answer along with two counterclaims. ECF
Nos. 38 & 40. The counterclaims allege that Covanta
breached the Service Agreement by failing to (1) adequately
maintain the HERC's cooling tower, and (2) meet capacity
and sales obligations. ECF No. 40 at 6-9. Covanta now moves
to dismiss the latter counterclaim.