A major Texas wind lawsuit has underscored the importance of
proper contracts to allocate the common risk of inadequate
Three wind farms owned by NextEra Energy Resources LLC agreed by
contract to sell annual minimum quantities of renewable energy (as
both credits and wind-generated electric energy that produced those
credits) to Luminant Energy Company, an electrical wholesaler,
starting in 2002. The wind farms failed to deliver those
quantities, allegedly because of inadequate transmission capacity
in the grid. Luminant sued to recover $29 million in liquidated
damages, for 2002 through 2005. The contract provided a liquidated
penalty of $50 per megawatt hour for renewable energy and credits
the wind farms failed to deliver.
The wind farms counterclaimed, claiming that their shortfall was
due to failure (by Luminant and others) to supply adequate
transmission capacity by upgrading their lines and facilities. As a
result, ERCOT, managed by the Electric Reliability Council of
Texas, forced the wind farms to reduce production. Luminant denied
any obligation to provide the windfarms with adequate transmission
In July, the Dallas Court of Appeals (Fifth
District) ruled against the wind farms. According to the
court, Luminant's explicit obligation to provide transmission
services did not require it to provide all the
transmission capacity that the wind farms needed to meet their
contractual commitments to deliver energy. Accordingly, the
liquidated damages provision is enforceable. The case was remanded
to the trial court to determine the quantum of liquidated
Similar issues must be addressed in Canadian wind energy
contracts, since transmission constraints frequently occur. I
wonder if the Texas wind farms will be suing their lawyers
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
In Bank of Montreal v Bumper Development Corporation Ltd, 2016 ABQB 363, the Alberta Court of Queen's Bench enforced the "immediate replacement" provision in the Canadian Association of Petroleum Landmen 2007 Operating Procedure...
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