NOTICE -- New Hartford News

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Date Posted: Sat. Nov 18, 2006 12:47 pm
Author: Christopher A. Jones
Subject: NOTICE

Be Advised

The action of: The Town of New Hartford, et.al. v. CRRA is currently in the trial phase at Waterbury Superior Court, Waterbury, Ct.
Trial procceedings representing the 70 member Towns of the Mid Conn Project are scheduled to resume at 0930 Monday 11/20/06, Courtroom 3A.

Christopher Jones
Town of New Hartford

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[> CRRA Trial Reaches Second Week -- Citizen, Mon. Nov 27, 2006 9:23 am [1]

CRRA Trial Reaches Second Week
11-24-2006 -- By DAVID FINE Staff Reporter
Winsted Journal

NEW HARTFORD — First Selectman Bill Baxter said Tuesday the Connecticut Resources Recovery Authority has the cash reserves needed to repay the 70 towns named in a lawsuit against the regional trash authority, and needs to reduce those reserves "to reflect prudent practice."

Now in its second week, the trial has seen testimony from CRRA President Thomas D. Kirk, town officials and an expert on contract law, who, Baxter said, testified as to the illegality of the CRRA’s 2000 transaction with Enron.

Professor Clayton Gillette, who teaches courses on local government law and contract law at New York University, said he was called in by the state to testify on a contract dispute. According to court records, the CRRA "loaned" Enron some $220 million as part of a trash-for-energy deal in 2000, shortly before the Texas energy giant declared bankruptcy.

Though Gillette refused to comment on his own testimony, citing the ongoing trial, Baxter said the professor essentially stated that the initial transaction between the CRRA and Enron was unlawful. The majority of the 70 towns included in the Mid-Connecticut Project — one of four groups served by the CRRA — are now suing to retrieve costs incurred as a result of the company raising tip fees in the wake of Enron’s collapse.

CRRA spokeman Paul Nonnenmacher said last week that his company has been doing everything in its power to keep costs low for the towns it serves.

To that, Baxter said, "We respectfully disagree."

Nonnenmacher said the $220 million cited in the case isn’t even half of what the CRRA stands to lose because of the botched Enron deal.

According to his company’s estimates, the CRRA will ultimately lose some $475 million in projected revenues from selling electricity.

He said that, had the CRRA done nothing else to offset its losses in the wake of the Enron scandal, tip fees would have soared from $82 in 2002 to $92 today.

But the CRRA has reportedly already received some $110 million in settlements, and Baxter claims that money was used to pay down the company’s debt.

"Our complaint is that we deserve some return on those settlements, and that the formula for establishing the rate charged is not consistent with the contract," which the towns originally signed with the trash authority, Baxter said.

Shelton Mayor Mark Lauretti was summoned to testify Monday in Waterbury, after he allegedly sent out a letter to the 70 towns named in the lawsuit last week, urging them to drop the suit. Baxter said that request has been "tabled," however, since Lauretti sits on the CRRA’s specially-appointed board of directors and Shelton isn’t one of the 70 towns in the Mid-Connecticut Project.

"Shelton has no standing in this suit, and Mr. Lauretti has a conflict," Baxter said, adding that the towns have been trying to resolve the dispute for two years now.

"Our objective hasn’t changed from the beginning," he said. "We want to be reimbursed for any costs to the town that are directly attributable to the Enron loss, and not a cent more or less. The CRRA has already retrieved over $110 million; we estimate the cost to the towns to be about half of that."

He said, furthermore, that going forward, the rate charged per ton of solid waste collected by the CRRA should be "cost-based," and not subject to market rate consideration, and the CRRA’s cash reserves should "be reduced to reflect prudent practice."

"We’ve learned through the trial that some of these reserves are excessive," he said. "They reduced their debt; that should be reflected in reduced rates."

Baxter said he still hopes to be able to settle the lawsuit before the judge is forced to render a decision.

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[> New Hartford v. Connecticut Resources Recovery Agency -- citizen, Mon. Nov 27, 2006 9:26 am [1]

New Hartford v. Connecticut Resources Recovery Agency
11-17-2006 -- By DAVID FINE Staff Reporter
Winsted Journal

NEW HARTFORD — The collapse of energy behemoth Enron Corp. in 2001 made waves throughout the civilized world. No surprise, then, that it made a splash here, in the Northwest Corner.

But its impact seems to have been more dramatic than most would have expected: A deal Enron made with the Connecticut Resources Recovery Authority — a quasi-public agency charged with the disposal and storage of the bulk of Connecticut’s solid waste (read: garbage) — led to severe monetary losses in the state.

According to court records, the CRRA "loaned" Enron some $220 million as part of a trash-for-energy deal in 2000, shortly before the Texas energy giant declared bankruptcy. Following the disastrous collapse, the state’s Legislature appointed an advisory board at CRRA to assist in mitigating the heavy losses. Part of the ensuing plan involved raising tip fees — the amount towns are charged per ton for their solid waste — by up to 40 percent for the 70 towns included in the CRRA’s Mid-Connecticut Project. (The CRRA oversees four energy projects, each consisting of a group of towns centered about a specific trash-to-energy plant. The 70 towns in the Mid-Connecticut Project deliver garbage to the trash-to-energy plant in Hartford.)

According to New Hartford First Selectman Bill Baxter, by raising tip fees in the wake of Enron’s collapse, the CRRA in effect forced the towns to make up for the lost revenues. Now, five years later, many towns are still trying to get their money back.

"We sued the CRRA for losses, because the costs were passed on to the towns," Baxter said last week, suggesting then that the towns and the CRRA might be close to a settlement.

"We really tried, in good faith, to settle this before it went to trial," he said. But just when it looked like they would be able to reach an agreement, the negotiations fell apart.

"We thought we’d have a settlement, but it didn’t fly," Baxter said.

But now, in lieu of a settlement, the CRRA has been taken to court.

The case, New Hartford v. Connecticut Resources Recovery Authority, went to trial Monday morning in Waterbury.

CRRA spokeman Paul Nonnenmacher contends that his company has been doing everything in its power to keep costs low for the towns it serves. He said the state-appointed advisory board, established by Connecticut’s Legislature in 2002, has worked tirelessly since its creation to keep the CRRA from following in Enron’s footsteps.

"Enron went bankrupt," he said. "We’ve done a lot of hard work to avoid going that route."

He said the $220 million cited in the case isn’t even half of what the CRRA stands to lose because of the botched Enron deal. According to his company’s estimates, the CRRA will ultimately lose some $475 million in projected revenues from selling electricity.

"With the revenues and the future value of money, it was a very substantial loss," he said, but insisted that the CRRA had done everything in its power to limit the costs passed on to the towns.

He points to a chart included in a February 2006 press release from his office, which depicts the rising tip fees, year by year, since 2002. The chart shows that fees have indeed risen significantly, from $51 per ton in 2002 to a high of $70 last year (scaled back to $69 as of July 1, 2006), but also shows what tip fees would have been during those years had the board not undertaken other mitigation efforts.

If the CRRA had simply raised tip fees and done nothing else to offset its losses in the wake of the Enron scandal, the company says fees would have soared from $82 in 2002 to $92 today.

Nonnenmacher further contends that the $220 million transferred to Enron wasn’t exactly a "loan," but instead part of a complicated deal necessitated by Connecticut Light and Power’s opting out of a contract with CRRA the year before.

"[That it was a loan is] the Attorney General’s opinion...we just call it a transaction," he said, tracing it all back to what he calls the "restructuring of the electric industry in Connecticut."

The CRRA used to have a deal to sell the electricity generated by the 70 Mid-Connecticut Project towns to CL&P. But in 2000, CL&P decided to buy their way out of that contract. As part of the buy-down of that contract, the CRRA wound up with a large sum of cash, said Nonnenmacher.

"It was a complete anomaly. Our revenues are supposed to cover our expenses, period," he said. "We also were left with no place to sell our electricity."

So the CRRA bought the energy-generating facility at its trash-to-energy plant in Hartford from CL&P, then entered into an arrangement with Enron, transferring $220 million to the Texas energy company, which agreed to buy the energy created by CRRA’s Mid-CT Project. Enron agreed to pay $26.4 million a year, for the life of the project, which comes to an end in 2012.

In 2001, however, Enron stopped making payments — just before declaring bankruptcy.

Baxter said New Hartford and the other 69 towns suffering from increased tip fees bear no responsibility for the CRRA’s losses, and thus should not have to pay for them. Hence, in 2003, the town of New Hartford filed suit against the CRRA to recover the extra tip fees.

Baxter said he felt the towns should not be held responsible for the CRRA’s mistake. And though it was initially brought by New Hartford, it has now become a class-action suit on behalf of the 70 towns in the Mid-Connecticut Project, who are suing the CRRA for the extra costs incurred in conjunction with the raised tip fees. More on this as it develops.

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