Court reinstates Illinois incinerator subsidy
Date: 27-Nov-02
Country: USA
Cook County Circuit Court Judge Robert Boharic ruled that a 1996 Illinois law that yanked the subsidy cannot be retroactively applied to projects that were already under way at the time the law was enacted.
He added that he planned to enter a permanent injunction against the application of the law to the incinerators that sued Commonwealth Edison, a unit of Exelon Corp. , and the state of Illinois over the matter.
Boharic's ruling came more than six years after incinerator developers filed their lawsuits challenging the state Legislature's repeal of the Retail Rate Act that was spurred by intense lobbying by environmental activists. The act had enabled incinerators to sell electricity they generated to Commonwealth Edison at a higher-than-market rate. The electric utility then became eligible for tax credits equal to the difference between the higher rates and market rates.
Tabrina Davis, a spokeswoman for Commonwealth Edison, said the utility had always acted in a manner consistent with public policy and state law and was "more than willing" to resume paying the higher rate to the incinerators if a tax credit was again made available.
Richard Redmond, an attorney representing the state of Illinois, said Boharic's ruling will be appealed to the Illinois Appellate Court. He added that any move to seek monetary damages against the state would have to be filed in the state's court of claims, an arm of the Legislature.
The incinerator developers, who had largely depended on the higher rates to pay off nearly $500 million of unrated, tax-exempt revenue bonds, claimed the retroactive repeal of the act was unconstitutional.
David Berten, an attorney representing New Heights Recovery & Power, the operator of a tire-burning incinerator in Ford Heights, Illinois, said that facility has been operating at a loss because of the lost subsidy and that damage claims would rise above $80 million.
He said that damage claims were currently pending only against Commonwealth Edison. But Boharic said the incinerators could decide to seek "some specific monetary amounts from the state."
Tom O'Brien, general counsel and senior vice president at Foster Wheeler Corp. , a Clinton, New Jersey-based international energy and engineering company that developed an incinerator in Robbins, Illinois, said the company's complaint included damage claims. He added while he did not know the amount of damages, the company would take a look at seeking damages from both Commonwealth Edison and the state.
Foster Wheeler was pursuing the litigation even though it was no longer involved in the Robbins facility. In 1999, bondholders of about $385 million of bonds sold in 1994 to finance the facility agreed to a debt restructuring. In 2000, the incinerator was shut down in hopes of finding a buyer.
Robbins Mayor Irene H. Brodie said she welcomed the ruling and hoped it would allow the Chicago suburb to do something positive with the facility.
A third incinerator, developed by CGE Fulton LLC, was financed but never built in Fulton, Illinois. John Blim, an attorney representing that facility, said that a deal may be put together to resurrect that project.
