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Rock Energy files lawsuit challenging validity of Rockton referendum

 

JANESVILLE, Wis. (May 11, 2009) – Rock Energy Cooperative today filed suit in the Western Division of the U.S. District Court for the Northern District of Illinois asking the court to declare that the Village of Rockton does not have legal authority to acquire electric and natural gas distribution systems owned and operated by Rock Energy. Village officials claim that an April 2005 referendum authorizes them to acquire and operate those systems and to issue bonds to finance that transaction.

“Rock Energy has been working hard to preserve the relationship and resolve this matter with the Village of Rockton,” said Rock Energy CEO Shane Larson. “We have many concerns about Rockton’s ability to acquire these assets, starting with what we believe to be a fatally flawed ballot measure. The cooperative has expressed this and other concerns to Village officials on countless occasions over the last four years. We have reluctantly filed this suit in order to resolve this matter.”

Larson added that Rock Energy was concerned that safety and reliability, not to mention price, would suffer if the Village of Rockton attempted to take on this serious responsibility. “Rock Energy has been providing safe and reliable utility service for more than 70 years,” he said. “And, we have seen no evidence that the Village could come close to matching the rates our cooperative, a not-for-profit, cost-of-service provider, is able to offer its members.”

Lawsuit snapshot
In its court filing, the cooperative cites the following flaws with the 2005 ballot initiative:

• A $13 million difference between the dollar amount shown on the referendum published to voters before the election ($35 million), and the dollar amount shown on the ballot voters got on election day ($48 million).

• The measure specifically authorized the Village to negotiate to purchase, or take by eminent domain, the assets of the South Beloit Water, Gas & Electric Company (SBWG&E), an indirect subsidiary of the investor-owned, for-profit Alliant Energy that was legally dissolved following the acquisition of those assets by Rock Energy. Neither the referendum nor the ballot made reference to acquiring assets from Rock Energy.

“This lawsuit argues that either of these problems would be enough to invalidate the referendum,” said Brad Koch, a Rock Energy attorney. “When taken together, they make an even more compelling case that the ballot measure was fatally flawed.”

 

History
The Rock Energy Cooperative began serving Rockton in February 2007 as a result of its agreement to acquire service territory from Alliant Energy.

In 2004, Alliant Energy made a business decision to sell its comparatively small Illinois operations, which were operated as SBWG&E, and focus on its core businesses in states where it had a larger presence.

When Alliant Energy decided to exit the state of Illinois, it solicited bids from all interested buyers. Rock Energy Cooperative (REC) and Jo-Carroll Energy (JCE), a cooperative based in Elizabeth, Ill., teamed up to submit bids for the systems in north-central and northwestern Illinois, respectively.

Alliant Energy selected the REC/JCE team, in part, because it believed their decades-long track records of safely and reliably serving nearby communities would favorably impress regulators overseeing the transaction.

“A big reason the transaction took two years to close was the ICC (Illinois Commerce Commission) approval process, which took a year,” said Koch. “The ICC completed an extremely thorough examination of Rock Energy’s rates, management team, safety record, reliability, community impact, ability to perform, and like matters, approving the transaction in February 2007. A sale of utility territory between the cooperative and the Village municipality would probably not be subject to similar scrutiny by a regulatory body.”

In April 2005, voters in Rockton approved the non-binding referendum at the center of the current lawsuit.

Rather than complicate the transaction, Rock Energy signed an agreement with the Village of Rockton that allowed Alliant Energy’s sale to the cooperative to go through, with the understanding that the two parties would discuss a potential sale of assets used to service the Village of Rockton at a later date.

This agreement did not mandate a sale, nor did it set a price for any potential transaction. It simply required the Village of Rockton and Rock Energy to explore the matter in good faith.

“Rock Energy has more than met its obligation to negotiate in good faith with the Village, and filed this lawsuit as a last resort,” said Larson. “It’s important to remember that the citizens of Rockton already own a financial stake in their electric and natural gas company because Rock Energy is a not-for-profit cooperative owned by the members we serve, including those in Rockton and across our entire system. Every one of our members has a vote, and their interests are protected by a board of directors that is democratically elected by and from the membership.”

Established in 1937, Rock Energy Cooperative is a not-for-profit utility distributing safe and reliable electricity and natural gas to approximately 26,000 meters across its nine-county service area in northern Illinois and southern Wisconsin. Headquartered in Janesville, Wis., the cooperative also has an office in South Beloit, Ill. For more information, visit www.rock.coop.

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