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We Energies settles Bechtel claim (UPDATE)

Construction of two coal-fired power plant units in the We Energies power plant in Oak Creek is more than 90 percent complete. (Photo courtesy of We Energies)

Construction of two coal-fired power plant units in the We Energies power plant in Oak Creek is more than 90 percent complete. (Photo courtesy of We Energies)

By Sean Ryan

We Energies and Bechtel Power Corp. are calling a truce in their feud over the Oak Creek power plant project.

The utility and the contractor Monday announced the resolution of a claim Bechtel filed in December 2008 seeking a $515 million increase in its contract with We Energies to build two coal-fired generating units at the Oak Creek plant.

According to the agreement, We Energies agreed to pay Bechtel an additional $72 million for construction and labor costs on the project. It also gave the contractor extensions on its completion dates.

“We find it to be fair for both parties,” said Barry McNulty, We Energies spokesman, “and it keeps the focus on completion of the largest construction project in the state’s history.”

Bechtel spokesman Francis Canavan said he would not comment on the settlement beyond information in a Monday statement and a report issued to the U.S. Securities and Exchange Commission.

The dispute began after poor weather in 2007 and 2008 delayed work on the project. Bechtel filed its claim, and the companies waited to reach a settlement.

Bechtel already has missed a Sept. 29 deadline in its contract to complete the first power plant generating unit. The contract required Bechtel to pay penalties for missing deadlines.

Under the deal announced Monday, We Energies agreed to extend the completion date for the first unit to Jan. 27. The second unit received a 60-day deadline extension to Nov. 28. Bechtel is expected to finish the second unit by August.

McNulty said he does not know whether the increase in the contract cost will require We Energies to seek more money for the project than was approved by the Public Service Commission of Wisconsin. The project will cost more than $2 billion.

McNulty said the utility must report to the PSC at the end of construction when all costs are tallied. It will be up to the PSC to decide whether We Energies must raise more money to pay for the project than has been approved, he said.

“That has yet to be determined,” McNulty said.

One method to raise more money is to change the terms of the leases signed by three utilities that will buy power from the plant, McNulty said. The three utilities are WPPI Energy, Sun Prairie; Madison Gas & Electric; and We Energies. McNulty said it will be up to the PSC to determine what other means of raising money could be considered.

McNulty said the delay on completing the project will not affect service to We Energies customers.

“We obviously did that with the customers in mind,” he said.

2 comments

  1. Does anyone know why Bechtel believes it is due the extra money?

  2. Poor weather in 2007 and 2008 delayed work on the project and resulted in higher costs. If you’re asking why the contractor filed a claim to cover those costs, instead of eating the additional expense, I can try to hunt down an answer.

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