BPA to seek damages on Kaiser contract rejection
Tuesday September 24, 6:48 pm ET
NEW YORK, Sept 24 (Reuters) - The Bonneville Power Administration (BPA) plans to seek damages from Kaiser Aluminum Corp. for breach of contract since the bankruptcy court approved the aluminum producer's petition to reject its a five-year power deal, a BPA spokesman said on Tuesday.
"The bankruptcy court granted Kaiser's request to seek termination of their contract with the Bonneville Power Administration and that will happen October 1 of this year." said Bill Murlin, spokesman for giant U.S. Northwest power generator BPA.
As part of Kaiser's filing for protection under Chapter 11 of U.S. bankruptcy code in Federal Court in the District of Delaware, the primary aluminum producer had petitioned to be let out of its electricity contract with the giant federally chartered power generator.
On Monday, U.S. bankruptcy court approved its petition to reject a five-year fixed power contract with the Bonneville Power in Portland, Oregon.
Scott Lamb, spokesman for Kaiser said Monday after the court hearing that Kaiser would formally reject the power contract with BPA once it had provisions for power from sources other than BPA.
"Our lawyer's interpretation is that the court accepted Kaiser's rejection of our contract. And that becomes effective on October 1," said BPA's Murlin.
BPA said it did not file a motion to contest Kaiser's petition to terminate its contract with the power provider. But, it will file for damages to recoup the money it would have gotten had Kaiser honored the contract until it expires in October 2006.
"But we will have to stand in line behind Kaiser's other creditors in its bankruptcy proceedings to see what we get," Murlin said.
At this point, Murlin said there is no way to anticipate what the total would be since, under a take-or-pay arrangement in the power contract, the amount due fluctuates according to market prices every six months.
The BPA spokesman also said Kaiser's contract for transmission rights through BPA's power grid will stand, and the rejected contract only referred to its right to receive power from BPA.
"It will not terminate their (Kaiser) transmission contract, this is a power contract we're talking about. When they terminate their (power) contract they will no longer be a direct service industry (recipient) and have no future rights to any power from us," said Murlin.
Since BPA's power has already been distributed under fixed contract arrangements, he added, "We will not be offering any new contracts to anyone between now and 2006."
At that point, he said, with many changes to the entire power industry being sought following the California energy crisis in 2001, no one knows what power arrangements will be made at that time.