Gordonsville Energy, L.P. v. Virginia Electric & Power Co.

39 Va. Cir. 292, 1996 Va. Cir. LEXIS 157
CourtRichmond County Circuit Court
DecidedMay 29, 1996
DocketCase No. LA-2266-4
StatusPublished
Cited by1 cases

This text of 39 Va. Cir. 292 (Gordonsville Energy, L.P. v. Virginia Electric & Power Co.) is published on Counsel Stack Legal Research, covering Richmond County Circuit Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gordonsville Energy, L.P. v. Virginia Electric & Power Co., 39 Va. Cir. 292, 1996 Va. Cir. LEXIS 157 (Va. Super. Ct. 1996).

Opinion

By Judge Randall G. Johnson

This breach of contract action is before the court on the parties’ cross motions for summary judgment. While numerous issues and sub-issues are raised by the parties, the court finds that the following three major issues are presented: (1) whether a party to a contract which contains a provision for liquidated damages may, by clear and unambiguous language in the contract, waive its right to challenge the imposition of such damages even if actual damages can be readily calculated and even if the liquidated damages provided for in the contract are so out of proportion to the actual loss that, in the absence of a waiver, they would be an unenforceable penalty; (2) whether the periods of time during which the events leading up to this action occurred are “Forced Outage Days” as that term is used in the contract and, if they are, how such days should be calculated; and (3) whether the contract’s “Force Majeure” provisions are invoked by the actions or inactions of what one of the parties argues are “third parties.” The parties contend that there are no material issues genuinely in dispute with respect to the issues presented and that summary judgment on each issue should be granted to one party or the other. The court agrees that summary judgment is appropriate.

Gordonsville Energy, L.R, which the parties refer to as “GELP,” owns and operates two electric generating facilities known as Facility 1 and Facility 2 in Louisa County, Virginia, near Gordonsville. The Facilities produce two forms of energy: thermal (low-pressure steam) and electric. [293]*293Thermal energy from the Facilities is used for the treatment of wastewater. The Facilities’ electrical capacity and output are used exclusively by Virginia Electric and Power Company (“Virginia Power”), a publicly regulated Virginia corporation which sells electric power to industrial, business, and residential customers in Virginia. Virginia Power obtains the electric power which it sells from its own power-generating facilities and from independent providers such as GELP. In a series of agreements, amendments to agreements, and restatements of agreements beginning in 1989, all of which will be collectively referred to in this opinion as one contract, GELP and Virginia Power set out their agreement covering GELP’s production and supply and Virginia Power’s purchase of GELP’s electrical capacity and output at the Gordonsville Facilities. The present dispute concerns the interpretation and application of several of the provisions of that contract as they relate to two power outages at the Facilities.

Under the terms of the contract, GELP is required to provide electricity to Virginia Power, whenever Virginia Power demands it, through what is called a “dispatch;” that is, when Virginia Power “dispatches” Facility 1, Facility 1 must provide the specified amount of electricity until the dispatch is ended. Virginia Power pays GELP for actual electrical output, called “Net Electrical Output,” and for GELP’s readiness to provide such output, called “Dependable Capacity,” in accordance with formulas set out in the contract.1 Also set out in the contract are several other definitions which are at the heart of the parties’ summary judgment motions. The first such definition is of the term “Forced Outage.” A “Forced Outage” is defined as:

An occurrence where: (i) any or all of the Facility’s Dependable Capacity is not available for Dispatch; or (ii) the Facility’s delivery of Net Electrical Output deviates from Virginia Power’s Dispatch level by greater than ±5%.

Contract § 1.18.

[294]*294A “Forced Outage Day” is:

A continuous twenty-four (24) hour period (a) beginning with the start of a Forced Outage, regardless of the number of actual outages that may occur during such twenty-four (24) hour period^), and (b) designated by the Operator as a Forced Outage Day.

Contract § 1.20.

Under the contract, GELP is allowed a certain number of Forced Outage Days each year without penalty. The precise number of Forced Outage Days for each year may vary and is determined by formulas and circumstances not germane to this opinion. Beyond that number, the contract provides:

The Parties agree that Virginia Power will be substantially damaged in amounts that will be difficult or impossible to determine if... the Facility exceeds the allowance for Forced Outage Days under Section 10.15(g) .... Therefore, to the limited extent set forth in the Agreement, the Parties have agreed on sums which the Parties agree are reasonable as liquidated damages for such occurrences. It is further understood and agreed that the payment of the liquidated damages is in lieu of actual damages for such occurrences. Operator hereby waives any defense as to the validity of any liquidated damages stated in this Agreement as they may appear on the grounds that such liquidated damages are void as penalties or are not reasonably related to actual damages.

Contract § 10.18 (emphasis added).

Section 10.15(g) of the contract provides, in pertinent part:

Payments [from Virginia Power to GELP] for Dependable Capacity will be reduced by six hundred thousand dollars ($600,000) as liquidated damages for each . . . Forced Outage Day that was not a Force Majeure Day and was in excess of the allowances specified in this Section 10.15(g) . . . 2

On June 30, 1994, a lightning bolt struck in the vicinity of GELP’s Facilities. The lightning caused damage to the electrical control systems of [295]*295the Facilities so as to render both Facilities inoperable. Facility 1 was out of service until July 7. Facility 2 was out of service until July 9. Neither Facility 1 nor Facility 2 was dispatched at the time of the lightning strike, although Facility 1 was conducting tests allowed under and contemplated by the contract. Based on the two sections of the contract just cited, and taking the position that the outages at both Facilities were the result of GELP’s defective lightning protection system, which Virginia Power claims was inadequate due to negligent design, construction, and installation, Virginia Power withheld $6,000,000 from its Dependable Capacity payments to GELP, Virginia Power claiming that GELP had exceeded its Forced Outage Days allowance by ten days.

On February 13, 1995, Facility 2 was operating at its required dispatch level when the “negative phase sequence alarm,” which from the parties’ descriptions appears to function like a household circuit breaker, tripped the steam turbine of Facility 2, thereby causing an outage. GELP reset the turbine but the unit tripped again and Facility 2 was taken out of service. It remained out of service until February 16. Virginia Power, claiming that GELP had again exceeded its allowable Forced Outage Days, this time by two days, assessed liquidated damages of $1,200,000, and has withheld that sum from its payments to GELP. This action was filed by GELP to recover the $7,200,000 which Virginia Power has withheld from it.

I. Liquidated Damages

The first series of issues presented for determination by the parties involves the question of liquidated damages.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Gordonsville Energy, L.P. v. Virginia Electric & Power Co.
44 Va. Cir. 138 (Richmond County Circuit Court, 1997)

Cite This Page — Counsel Stack

Bluebook (online)
39 Va. Cir. 292, 1996 Va. Cir. LEXIS 157, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gordonsville-energy-lp-v-virginia-electric-power-co-vaccrichmondcty-1996.