Local attorneys Perry Sanders and Robert J. Frank have notified the Colorado Springs city attorney’s office that they plan to file a class- action suit on behalf of utilities ratepayers against Colorado Springs Utilities.
The letter, sent to City Attorney Wynetta Massey, claims Colorado Springs Utilities violated its “fiducuary duty” when it signed a contract with Neumann Systems Group for a scrubber to remove pollutants from the Martin Drake Power Plant located near downtown Colorado Springs.
In a letter that was hand-delivered to the city Aug. 11, Sanders said, “This matter arises as the result of a breach of fiduciary duty by Colorado Springs Utilities in the award of a sole-source, non-competitive contract to Neumann Systems Group for emissions scrubbing systems in violation of CSU Procurement Regulation #00075.”
The document claims the city and CSU administration committed “wrongful acts,” as owners of the power plant, “including but not limited to breach of fiduciary duty or misstatement, omission, negligent act or breach of duty including misfeasance, malfeasance and nonfeasance, negligent ministerial acts, faulty preparation or approval of bid documents, bid specifications, other specifications or inaccuracies due to estimates of probable cause.”
Colorado Springs signed an agreement with NSG to build the NeuStream, a scrubber that reportedly removes sulfur dioxide and nitrogen dioxide from coal emissions to meet state and federal environmental regulations.
At the time, CSU officials believed the NeuStream — new technology developed by NSG — would meet the needs at Drake, fitting into the power plant’s constrained space.
As part of the agreement, CSU will receive a portion of the sales of any other NeuStreams sold by the local engineering firm.
The potential suit — the city has 90 days to respond to the complaint before a class action suit is filed — stems from a 2011 decision by CSU’s Board of Directors (actually the elected City Council members acting in a different role) to grant the contract to NSG to build a clean coal scrubber at Martin Drake.
However, the letter from the Sanders Law Firm says the municipally owned utility violated its own regulations for contracts that are higher than $10,000.
“The sole source justification, signed and approved on Sept. 29, 2011, fails to provide the required explanation of why no other contractor is able to meet the desired outcome; only states that NSG uses propriety [sic]technology and in a smaller footprint, but does not indicate why other technologies would not work; and states that the NSG system ‘appears to be a less costly alternative,” the letter says. “However, this is not a valid or sufficient justification for a sole source, non-competitive contract. A competitive bidding process and review of formal proposals are required to compare option costs.”
The letter goes on to say that the results of two requests for information under the Colorado Open Records Act, show that studies by Stanley Consultants in 2007 and 2009 indicated that conventional dry scrubber technologies would fit at the Martin Drake power plant.
“This alone invalidates the 2011 sole source justification,” the letter says. “Sole-source documentation in this case leaves the appearance of impropriety and a conflict of interest.”
Costs were estimated to be around $80 million, but have now risen to $170 million, leading to claims that CSU raised electric rates to meet the rising cost of the project, according to the letter.
If the suit is filed, defendants would be the CSU Board of Directors in 2007 and 2011, the members who voted for and signed the single-source contract. Other defendants could also be named.
The claimants in the case are CSU ratepayers, and the Federal Court putative class representative is Nicole Rosa of Colorado Springs.
Rosa has long been a critic of NSG and CSU’s handling of removing pollutants like sulfur dioxide and nitrogen dioxide from coal fired power plants.
The letter says the attorneys are available to meet with the city before a suit is filed.
“If you feel we have somehow misinterpreted the law or the facts associated with this notice, we are immediately available to meet with you [City Attorney Wynetta Massey], CSU or any other person or entity you think might be able to shed light on what we might be missing,” the letter said. “It is not our intent to waste our resources pursuing this further if there is an obvious explanation that is not apparent on its face, or if you think talks might be productive to help us understand why our client’s concerns are unwarranted.”
When asked for comment, Sanders said he does not speak about potential litigation.
The city responded similarly, acknowledging it received the intent to sue.
“We are processing it the same way we do all claims,” said Jamie Fabos, chief communications officer for the city of Colorado Springs.
“That’s really all we can say at this point.” n CSBJ
— John Hazlehurst contributed to this article.
– John Hazlehurst contributed to this article.