December 14, 2006

City Finding Limited Legal Options For Exit From Electricity Contract

City Attorney David Peppard offered a bleak forecast for proponents of a possible change in the city’s electrical provider. Peppard had been working with a St. Louis attorney that represents Tri-County Electric Cooperative in a review of the city’s contract with the Missouri Public Energy Pool (MoPEP).

After electricity prices rose dramatically in 2006, the city council met with representatives of MoPEP as well as Tri-County to consider options for bringing prices back down for customers of the municipal service.

At an October meeting with the city leaders, Tri-County had expressed interest in possibly purchasing the city’s electrical system and taking over the service.

At that time, the council had directed Peppard to work with the group’s legal counsel to review the city’s existing deal with MoPEP to determine if the contract could be exited, if and when the city chose to do so.

At the December 7th meeting of the Memphis City Council, Peppard did not offer a good prognosis for such a move, if the city was actually interested in being removed from the pact.

“We looked at this contract and came up with maybe three or four approaches for the city,” Peppard stated. “One of those is filled with bear traps and the other is sort of a pie-in-the-sky shot,” alluding to the fact that the city did not have strong legal groundwork in place for terminating the deal.

Peppard stated the only 100-percent safe route the city would have to leave MoPEP was by the five-year notification specifically described in the agreement.

Peppard highlighted a portion of the contract that did offer entities a 60-day window to leave the electric buying consortium for price issues, but added that neither attorney felt that a court would likely view the city’s rate increase as large enough to warrant a contract dispute.

The only other option would simply be a request to MoPEP for contract waiver, forgoing the five-year waiting period as prescribed by the deal. Both attorneys expressed doubt that the consortium would agree to such a request.

“Basically it is the consensus of these two attorneys that the city is bound by this contract for five years unless we want to take a shot in the dark on a couple of legal actions to try to escape the deal,” said Memphis Mayor Roger Gosney.

The council took the attorney’s report under advisement. Mayor Gosney asked the aldermen to be prepared to discuss the issue at an upcoming meeting with the mindset of making a decision whether or not to proceed with legal action involving the contract.

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