Provo City has agreed to accept more than $615,000 from Utah Power & Light Co. as an out-of-court settlement over a lawsuit that originally asked for $2 million plus interest for power plant overbilling.
"We felt like if we could sit down and negotiate, we could settle this," said Mayor Joe Jenkins. "It turned out that they were willing to go to the table. One thing the lawsuit did was get the parties to the table to negotiate."The disagreements over power plant charges came to a head in March when Provo City along with the Utah Municipal Power Agency filed the suit, saying it was time for UP&L to realign costs and retrieve the difference in funds.
In 1980, Provo bought 6.25 percent interest in UP&L's Hunter facility, a coal-fired steam plant in Emery County, to provide for the city's power needs. Since then Provo says it has been overcharged through billing by UP&L as a wholesale customer instead of an owner.
The city claimed that certain costs such as property insurance, employee pensions and benefits were inadvertently being duplicated elsewhere under administrative and general costs.
The settlement provides for a new method of accounting for the city's share of operating costs at the Hunter plan. UP&L charges the city for power plant operating costs associated with that ownership interest.
As part of the settlement, UP&L will refund the $615,925 plus interest to Provo and the Utah Municipal Power Agency, a member-owned agency with 80 percent belonging to Provo and 20 percent to Spanish Fork, Salem, Nephi, Manti and Levan.
Provo City will receive a significant amount of the settlement because it has had part ownership in the Hunter plant since 1980, Jenkins said. The remaining refund will go to the member-owned agency, which has had part ownership since 1985.
"The real benefit to the refund is that this will carry us into the future - 25 years more on the Hunter proj-ect," Jenkins said. "That's a $3.25 million savings over time."
UP&L had previously offered $197,000, but Jenkins said that amount was not even close to what was due to the city.
The $615,000 is "right where we figured we would come in. We determined it to be reasonable and within our expectations. We are happy with it," he said.
Orrin Colby, accounting vice president of UP&L, said, "Our relations with Provo are important to us. We are pleased that this difference of opinion has been settled amicably with terms that are fair to the city and the company."