BENTON COUNTY WIND FARM LLC v. DUKE ENERGY INDIANA, INC.

Filing 107

ORDER - ON THE PARTIES' MOTIONS FOR SUMMARY JUDGMENT; This matter comes before us on the parties' Motions for Summary Judgment. Dkt. Nos. 53 , 59 The motions are fully briefed. Having considered the arguments and the uncontroverted evidence, we DENY Benton County Wind Farm LLC's Motion for Summary Judgment and GRANT Duke Energy Indiana, Inc.'s Motion for Summary Judgment. Signed by Judge Sarah Evans Barker on 7/6/2015. (CKM)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
BENTON COUNTY WIND FARM LLC,
Plaintiff,
vs.
DUKE ENERGY INDIANA, INC.,
Defendant.

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No. 1:13-cv-01984-SEB-TAB

ORDER ON THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT
This matter comes before us on the parties’ Motions for Summary Judgment. [Dkt.
Nos. 53, 59.] The motions are fully briefed. Having considered the arguments and the
uncontroverted evidence, we DENY Benton County Wind Farm LLC’s Motion for
Summary Judgment and GRANT Duke Energy Indiana, Inc.’s Motion for Summary
Judgment, for the following reasons:
Introduction 1
The term “wind power” describes the process by which wind’s kinetic energy is
converted into electricity by the use of wind turbines. A wind turbine works the opposite
way that a fan works. Instead of using electricity to make wind, like a fan, wind turbines
use wind to make electricity. The wind turns blades which spin a shaft that connects to a

1

Drawing on readily-available internet sites, we have embellished our treatment of the
issues raised by the parties with this introductory explanation of wind energy to provide context
for the business relationship out of which both the contract and the parties’ ensuing dispute arose.

generator to generate electricity. The electricity cannot be stored, however. The electricity
passes through a grid and is transmitted through electrical wires to the consumer.
Although large-scale wind generation is relatively new, in the past decade it has
become one of the fastest growing sources of electricity generation in the United States.
Prior to 2008, wind power in Indiana was extremely rare, limited to individual, small-scale
turbines. Over the past seven years, Indiana has increased its electrical output to 1,745
MW generated by 1,031 turbines on six wind farms. According to Wind on the Wires (a
wind advocacy organization), within the next decade Indiana is expected to triple its wind
energy generation to more than 5,000 MW.
Benton County Wind Farm was the first wind farm in Indiana, beginning operations
in 2008, and consists of 87 turbines. These wind turbines (or their blinking red warning
lights) are observable for miles, especially while driving on I-65 from Indianapolis to
Chicago. Just one of these 87 turbines provides power sufficient to supply 600 homes per
year. The towers for these turbines often exceed 200 feet in height, are costly to install
(approximately $1-2 million per turbine), and are extremely large and heavy (weighing
approximately 300,000 pounds per turbine).
This new and developing source of energy has given rise to new business entities
and relationships as techniques for the commercial exploitation of this resource have
evolved and progressed. The litigation before us here reflects all these factors, requiring
the Court to review the contract entered into by the parties and to resolve the dispute that
has arisen under it.

2

Background and Facts 2
The parties agree as to nearly all of the relevant facts. Most importantly, the parties
stipulate that the contracts at issue are “clear and unambiguous.” [Dkt. No. 55-1 at 1
(Duke); Dkt. No. 63 at 17 (BCWF).] The parties’ dispute has arisen over their respective
contractual obligations in light of subsequent changes in circumstances relating to the sale
and purchase of wind energy. The specific provocation for the filing of this lawsuit was
Duke’s submission of bids to the intervening grid authority the amounts of which fell below
the threshold at which Benton County Wind Farm LLC (“BCWF”) was able to run its wind
farm at 100% capacity. BCWF asserts that Duke’s actions constitute a breach of the
parties’ contract, which Duke denies.

2

Our jurisdiction in this matter is authorized by 28 U.S.C. § 1332 because there is complete
diversity of citizenship between the parties and the amount in controversy exceeds $75,000
exclusive of interest, attorney’s fees, and costs. [See Compl. at ¶¶ 11-14.] BCWF provides the
identity of its members in paragraph 11 of the Complaint. [Id. at ¶ 11.] BCWF is a Delaware
limited liability company whose members are Benton County Holding Company LLC and Aircraft
Services Corporation. Benton County Holding Company LLC is the managing member of BCWF
and is a Delaware limited liability company. Benton County Holding Company LLC’s members
are Orion BC Holdings and Vison Energy LLC. Orion BC Holdings LLC is a Delaware limited
liability company whose sole member is Orion Energy Group LLC, whose members are all citizens
of California. Vision Energy LLC is an Ohio limited liability company whose sole member is J.
Turner Hunt. Mr. Hunt is a citizen of Ohio. Aircraft Services Corporation is incorporated in
Nevada and maintains its principal place of business in Connecticut. [Id.] Duke is incorporated
in Indiana and has its principal place of business in Hendricks County, Indiana. [Id. at ¶ 12.]

3

A.

The Introduction of Wind Energy in Indiana. 3
In 2005, when Indiana’s General Assembly enacted legislation to mandate utility

procurement of renewable energy, Duke issued a solicitation for 100 megawatts (“MW”)
of renewable power generation requiring the successful bidder to develop, permit,
construct, and operate a renewable power plant. In exchange, Duke offered to pay a fixed
price per MW generated. BCWF became the successful bidder in response to this
solicitation.
B.

The Renewable Wind Energy Power Purchase Agreement (“PPA”).
On September 1, 2006, Duke and BCWF entered into a Renewable Wind Energy

Power Purchase Agreement (“PPA”) whereby Duke agreed to purchase energy generated
by BCWF’s wind farm located in Benton County, Indiana (the “Wind Farm”). Several

3

Before detailing the facts giving rise to this dispute, we include a brief glossary of terms
and abbreviations as used by the parties throughout their briefing and by the Court in this Order.
LMP

Locational Marginal Price (the prevailing market price)

MISO

Midwest Independent Transmission System Operator, Inc.
(administrator of the regional grid at issue)

IR

Intermittent Resource

DIR

Dispatchable Intermittent Resource

SCED

Security Constrained Economic Dispatch

RT-SCED

Real Time Security Constrained Economic Dispatch

NRSI

Network Resource Interconnection Service

RTO

Regional Transmission Organization (aka MISO)

4

specific provisions of the complex arrangement embodied in the PPA are relevant to the
parties’ current dispute: 4

...

4

“RTO” is defined by the PPA as “the Midwest Independent Transmission System
Operator, Inc., a Regional Transmission Organization based in Carmel, Indiana, or its successor
organization, which is approved by the Federal Energy Regulatory Commission.” [PPA at Art. 1,
p. 7.]

5

[Dkt. No. 1-1 at Art. 4.] 5 The parties defined the term “Electrical Output” as follows:

[Id. at Art. 1 (Definitions).] 6 The Point of Metering is also a defined term in the PPA.

5

The parties agree that BCWF was entitled to earn Production Tax Credits (“PTCs”) for
all the power it generated.
6

Article 8 of the PPA provides in relevant part:

The meters and metering equipment (collectively, the “Meters”) at the Point of
Metering will be installed, maintained and repaired in accordance with the
Interconnection Agreement and will be owned and operated in accordance with the
Interconnection Agreement. The Interconnection Agreement shall provide that the
Meters will be installed such that they will measure the Electrical Output on the
high side of the Plant’s step-up transformers at the Point of Metering. Buyer will
have no responsibility for the ownership, operation, maintenance and control of the
Meters.
[PPA § 8.1.]

6

[Id.] With respect to the scheduling, delivery, and transmission of the energy generated by
BCWF, the parties agreed:

[Id. at Art. 6.]
The parties included provisions in their PPA addressing a termination of the
agreement by either party. Section 15.4 states: “[T]he Parties acknowledge and agree that
if this Agreement is terminated due to an Event of Default by either Party, the actual or
direct damages incurred by the non-defaulting Party shall include: . . . .” [Id. § 15.4].
Damages in the case of termination by the Seller due to an Event of Default by the Buyer
are to be calculated in the following manner:

7

[Id.] The PPA requires Duke and BCWF to conform to MISO requirements. [PPA § 5.4(d)
(“Subject to the right to Contest their applicability, both Parties will comply with all
applicable RTO Requirements in all material respects.”) (“RTO” is defined as “the
Midwest Independent Transmission System Operator, Inc.” (MISO).]
Endorsing the opinion of BCWF’s expert, Dr. Roy J. Shanker, Ph.D., Duke notes
that the PPA “has no provision for calculation of deemed generation” and the “PPA does
not contain any language on how to calculate the megawatt hours of energy that could have
been delivered.” [Dkt. No. 55-1 at 10.] 7

7

BCWF points to Section 15.4(a) of the PPA as a method for calculating lost generation
in the event BCWF terminates the contract due to Duke’s default. [Dkt. No. 86 at 14.] This section
is irrelevant, however, where, as here, the parties have affirmed the contract, claimed it is not
ambiguous, and seek to enforce it, not terminate it.

8

C.

Transmission Services.
The PPA includes a description of “Transmission Services” that may or may not be

required for Duke to accept the energy generated by BCWF:

[PPA at Art. 6.] “Transmission Services” is a defined by the PPA as follows:

[Id. at Art. 1.] MISO has never required Duke to obtain Transmission Services to accept
power that is delivered to the Point of Metering. Duke claims that it is not required under
the PPA to utilize Transmission Services to accept power that is delivered to the Point of
Metering. [Dkt. No. 55-1 at 15 (citing Shanker Dep. at 144:21-145:14).] 8

8

BCWF cites the testimony of its expert, Dr. Shanker, that Duke does “not need to use
transmission services – they have not, so far, used them. That doesn’t mean they don’t need to or
are not required to under the provision of 6.4.” [Dkt. No. 86 at 13 (citing Shanker Dep. at 142).]
However, Dr. Shanker’s opinion is not a fact, but a conclusion of law.

9

D.

The Joint Energy Sharing and Operating Agreement (“JESOA”). 9
On December 19, 2007, BCWF, Duke, and Vectren Power Supply, Inc. entered into

the Joint Energy Sharing and Operating Agreement (“JESOA”), which sets forth an agreed
method for dividing the electrical output of the Wind Farm. BCWF contracted with
Vectren for the sale of 30 MW of power from the wind farm in addition to the 100.5 MW
already subject to the PPA. [Dkt. No. 1-2 (JESOA (Recitals B-C)).]
The JESOA defines “Electrical Output” as “the electric energy output of the Facility
delivered to the Delivery Point.” [Id. at 3.] “Delivery Point” as defined in the agreement
is “the interconnection point of the Facility to the RTO-controlled transmission grid.” [Id.
at 2.] “Total Facility Output” as used in the JESOA means “the total electrical energy
produced by the Facility Capacity from time to time, net of energy used by the Facility, as
measured at the Delivery Point.” [Id. at 5.] Section 2.4 of the JESOA provides, in part:
Notwithstanding anything in this Agreement to the contrary, Seller shall have
the right to curtail the Total Facility Output as required under the
Interconnection Agreement or as instructed by the RTO or NIPSCO and to
comply with all RTO and NIPSCO operating procedures in effect from time
to time, and Duke and Vectren agree to cooperate with Seller in connection
therewith and to comply (to the extent compliance is required by either of
them) with all RTO and NIPSCO curtailment orders and operating
9

The majority of BCWF’s claims relate to both the PPA and the JESOA. BCWF notes the
similarity between these two agreements. [See Compl. at ¶ 25 (“Like the [PPA] between BCWF
and Duke, the JESOA makes clear that Duke and Vectren bear the entire economic responsibility
for bidding BCWF’s power into MISO’s electricity markets, and for paying any costs related to
the delivery of power to MISO.”) (quoting JESOA § 3.2(a)); id. at ¶ 26 (Like the [PPA], the JESOA
also makes clear that Duke and Vectren are not permitted to limit BCWF’s power output.”)
(quoting JESOA § 2.4); see also id. at Count I (Breach of Contract related to both the PPA and
JESOA), Count II (Breach of Implied Promise Not to Hinder Performance related to both the PPA
and JESOA), Count IV (Declaratory Judgment).] In their filings, the parties often refer primarily
to the PPA. [See, e.g., Dkt. No. 10 at 18-28 (BCWF); Dkt. No. 55-4 at 24-37 (Duke).] As a result,
we primarily discuss the PPA, but separately consider the JESOA, supra. [See Part E.5.]

10

procedures and with all RTO Requirements in effect from time to time.
Except to the extent expressly provided in the respective PPAs, neither Duke
nor Vectren shall have the right to curtail or reduce the Total Facility Output.
[Id. § 2.4 at 7 (emphasis added).] Duke and Vectren also agreed:

[Id. § 2.5.] The JESOA did not “modify the rights and obligations of the Parties under
[their respective PPAs] except to the extent expressly provided [t]herein [and] in the event
of a conflict between the terms of either PPA and [the JESOA], the terms of [the JESOA]
shall control.” [Id. § 8.5.]
E.

The Benton County Wind Farm and MISO.
The Wind Farm began operations on or about April 19, 2008. At the time the Wind

Farm began operating, it was the only wind farm in Indiana generating electricity. The
Wind Farm is interconnected to the transmission system owned by Northern Indiana Public
Service Company (“NIPSCO”) and controlled by MISO. MISO is the entity responsible
for administering the regional electrical grid covering Duke’s service area. According to
BCWF’s Vice President, James Eisen, MISO “manage[s] or operate[s] the transmission
grid in this region.” [Eisen Dep. 49:3-6.] MISO is the “traffic cop to make sure that those
deliveries [of power that’s being generated] don’t cause problems in the system.” [Id. at
49:17-22.]

11

1.

Locational Marginal Price (LMP).

The Locational Marginal Price (“LMP”) constitutes a significant component of the
parties’ overall dispute. The LMP is the prevailing market price for energy generated at a
specific time in a specific place. 10 The LMP is the amount that Duke receives from MISO
(when the LMP is positive) or pays MISO (when the LMP is negative) to inject BCWFgenerated power into the MISO grid. The amount that Duke pays BCWF is dictated by the
PPA; the LMPs do not affect the price Duke pays BCWF for electricity. Although BCWF
is not directly affected by the LMP, Duke’s cost (and that of its customers) is substantially
impacted by the LMPs.
The LMP can be positive, negative, or neutral. When the LMP is positive, Duke
benefits because MISO pays Duke for power that passes into the grid and Duke can
subsidize its payment to BCWF with the monies it receives from MISO. When the LMP
is negative, Duke pays MISO (in addition to BCWF) for the power that enters the grid.
When the LMP is $0/MWh, Duke pays only BCWF to inject power into the grid and no
money is exchanged between Duke and MISO.

10

The PPA defines the LMP as :

the market clearing price at a specific Commercial Pricing Node (CPNode) in the
Midwest Market that is equal to the cost of supplying the next increment of load at
that location. LMP values have three components for settlement purposes:
marginal energy component, marginal congestion component, and marginal loss
component. The value of an LMP is the same whether a purchase or sale is made
at that node.
[PPA, Art. 1.]

12

Duke’s cost for power fluctuates significantly based on the LMP. When LMPs are
negative, the cost of power to Duke is higher because Duke pays both MISO and BCWF
for energy. If, however, BCWF is prevented from generating electricity when the LMPs
are negative, then Duke does not purchase any electricity and as a result does not pay the
negative LMPs. If Duke purchases energy only when the LMP is positive or neutral, then
Duke’s cost is that which it agreed to pay BCWF pursuant to the PPA, or less.
2.

IR Rules.

At the time the parties entered into the PPA and BCWF became operational, on
April 19, 2008, MISO treated wind generation facilities as Intermittent Resources (“IR”),
meaning that MISO accepted all available produced energy at the prevailing market price
(LMP) and MISO managed congestion issues manually.
As IRs, generators of wind energy were not required to inform MISO in advance of
expected electric generation, but were permitted to generate and deliver electric power
whenever possible (i.e., when the wind blew) in return for payment of the prevailing LMP
at its location. Duke describes the Wind Farm at this time as a “must run” facility – i.e.,
MISO took all of the power from the Wind Farm regardless of price. [Dkt. No. 82-1 at 6.]
As an IR, BCWF was not subject to curtailment by MISO based on the cost of its power
relative to the costs of other generators’ power. During the IR period, Duke submitted an
offer price in the day-ahead market that equaled the PPA price at the time the offer was
submitted.

Initially, LMPs paid to Duke for BCWF’s output were relatively high

(reflecting the relative abundance of transmission capacity available to BCWF as the first

13

wind farm in the area), allowing Duke to profit from the power it purchased from BCWF
and resold into MISO markets.
After BCWF had commenced operation, more wind farms were added by other
producers to the transmission grid in Benton County and surrounding areas without any
transmission upgrades or expansion in transmission capability.

In the immediate

geographic proximity of BCWF, the 106 MW Hoosier Wind Project was placed into
service in November 2009, and the 600 MW Fowler Ridge Wind Farm, which was placed
into service in three phases, began in early 2009 and was completed in December 2009.
As a result, by the end of 2010, more than 800 MW of wind resources were in operation in
or near Benton County. Consequently, MISO began to experience increasing congestion
in the transmission system in the Benton County area due to wind generation. MISO’s grid
did not have sufficient capacity to accommodate all the electric power that was being
generated. The increase in the number of wind farms also brought about a drop in LMPs
based on the additional supply, requiring MISO to discourage potential excess generation.
MISO can and did discourage generation in a congested area by requiring generation
facilities to accept lower LMPs for use of the grid. When MISO set a negative LMP, the
market participant (i.e., Duke) was required to pay MISO for MISO to purchase that unit
of power and inject the power into the MISO grid at the congested location. [Dkt. 1 at
¶ 16; Dkt. 19 at ¶ 16.] Duke paid MISO more than $4.4 million in negative LMPs in
connection with IR-classified power it purchased from BCWF prior to March 1, 2013.
Duke sought and received reimbursements from its retail customers for all negative LMPs
it incurred prior to March 1, 2013.
14

As a further response to increasing congestion, MISO issued manual curtailments
to BCWF and other wind farms pursuant to which MISO operators instructed wind farms,
including BCWF, to reduce or stop production at times when the Wind Farm was otherwise
capable of generating electricity. At times, therefore, BCWF did not generate all the power
it was capable of generating and Duke was not required to pay for all the power that BCWF
was capable of delivering but did not generate. [BCWF’s expert, Shanker Dep. at 77-78.]
The term used by the parties for the power BCWF is capable of delivering but does not
actually deliver is “deemed generation.” BCWF did not seek payment from Duke for
deemed generation during the IR classification period.
3.

DIR Rules.

Beginning in 2010, MISO created a new resource designation for wind farms called
Dispatchable Intermittent Resource (“DIR”). DIR is different from IR in one key aspect
relevant to the parties’ dispute: under MISO’s DIR rules, wind generators were made
subject to “economic dispatch,” meaning that Duke, as the contractually-designated Market
Participant, 11 was required to submit price offers to MISO indicating the prices at which
Duke was willing to sell BCWF’s output. In contrast, under the IR classification no bid
was required; BCWF was permitted to generate and deliver power in return for payment of
the prevailing LMP. Under the DIR designation, MISO accepted only the power that

11

The parties agreed in the PPA that Duke acting as the Market Participant was responsible
for submitting price and quantity offers to MISO.

15

cleared its 5-minute market price hurdle 12 as offered by Duke as opposed to MISO
accepting all power at the prevailing LMP under the IR classification.
The daily price MISO pays under the DIR system is based on an MISO proprietary
algorithm, which system is referred to as Security Constrained Economic Dispatch
(“SCED”). This computer algorithm produces significant variation in the LMP depending
on the precise location and time at which a seller seeks to supply power to the grid. DIRs
utilize communications protocols causing their dispatches in the real-time market to be
automated by MISO’s Real-Time Security Constrained Economic Dispatch (RT-SCED)
algorithm. The RT-SCED enables MISO to manage the real-time dispatches from its
generation facilities so that energy is produced at the lowest possible cost to its consumers,
while taking into account any operational limitations with the system’s generation and
transmission facilities. When MISO’s LMP at a wind generator’s location falls below the
Market Participant’s price offer, the RT-SCED de-selects that generator and creates an
automatic dispatch signal which is sent to the generator requiring it to reduce its electrical
power output or stop generating all together.
Thus, when Duke’s offer price exceeds the price MISO is willing to pay, MISO does
not clear BCWF to run; importantly, BCWF is obligated to follow MISO’s direction.
[Shanker Rpt. at 9; PPA § 5.4.] When MISO accepts Duke’s offer, the Wind Farm is
dispatched, and Duke pays for all power delivered to the Point of Metering. With rare

12

According to Kevin Neal, Duke’s business development manager for Duke’s wholesale
power origination and joint owner agreements group, MISO “would give five-minute dispatch
instructions to the generator based on all the inputs.” [Neal Dep. at 180-81.]

16

exceptions, MISO is the only entity that makes the decisions with respect to dispatch down
signals. [Shanker Dep. 243:6-15; Swez 13 Dep. at 204 (“Again, we’re [sic] not manually
curtailing the unit. MISO is curtailing the unit.”).] As Mr. Eisen acknowledges, “MISO
is running the market and clearing the price.” [Eisen Dep. 141:7-9.]
As a rule, it is difficult for Duke to determine in advance a price MISO will accept.
However, as BCWF notes, Duke has the ability to submit the lowest possible offer price
allowed under MISO’s tariff, which is negative $500/MWh. [Dkt. No. 86 at 13 (citing
Shanker Dep. at 209-10).] MISO makes decisions with respect to dispatch down signals
after Duke makes its offers [Dkt. No. 55-1 at 8]; however, the submission of the lowest
possible offer price by Duke has the effect of maximizing the amount of power produced
by BCWF [Dkt. No. 86 at 13]. Stated otherwise, if the offer price submitted by Duke is
greater than what MISO is willing to pay (the LMP), then MISO does not clear BCWF to
run. [Dkt. No. 86 at 14; Dkt. No. 55-1 at 8.] However, Duke’s offer does not always clear,
even when it is below the LMP, which, according to Duke, demonstrates that even a low
offer does not guarantee MISO will clear BCWF to run. [Dkt. No. 92-1 at 5.]
The DIR program became operational on June 1, 2011, and was voluntary among
the wind generators until February 28, 2013. According to Duke, as of March 1, 2013, the
program became mandatory for all wind resources that were put in service after 2005. [Dkt.

13

John Swez is an employee of Duke with the title Director, Generation Dispatch and
Operations.

17

No. 55-1 at 7 (citing Rose Report 14 at 6).] 15 Certain exceptions to DIR status were
permitted, including those where the wind farm’s entire capacity was covered by certain
transmission services. BCWF explains that the transmission-services exemption from DIR
rules resulted from a MISO study of wind resources with Transmission Services to
determine whether the injection of wind power into the utility grid required the installation
of network upgrades to the electrical grid. [Dkt. No. 86 at 12.] Duke chose not obtain
these transmission services so BCWF was subject to the DIR rules. [Id. at 12-13.]
According to BCWF, Duke also had the ability to designate the wind farm as “selfscheduled,” which allows it to operate as it did under the IR rules. [Dkt. No. 86 at 13-14.]
John Swez, testifying on behalf of Duke, attempted to explain during his deposition:
The truest exact nature of what it means in MISO is, is that you can call a
unit a self-scheduled unit, and MISO considers that unit fixed at its offer
price, similar to the way that Duke Energy offered Benton County before
DIR was essentially as a self-scheduled unit. Which you can accomplish the
same thing by making an offer, a commit status offer of must run, and having
the minimum, a maximum load equal to each other. That’s basically a selfscheduled unit.

14

Judah L. Rose is an expert hired by Duke who authored an expert report dated October
31, 2014 which was submitted by Duke.
15

BCWF maintains that Duke “made sure BCWF registered as a DIR,” in fact, insisted
that BCWF register as a DIR, because Duke did not want BCWF to become a behind-the-meter
generator to avoid DIR status. [Dkt. No. 86 at 10.] BCWF claims that “Duke specifically asked
MISO to send a letter ‘on MISO stationery’ stating that BCWF did not qualify for an exemption
from DIR rules (including the exemption that would have been available had Duke obtained
transmission services as it had agreed to do in the PPA).” [Id. (citing Ex. R).] That
characterization, however, is not at all what Exhibit R states. Exhibit R, as submitted by BCWF,
is an email communication initiated by Diane Jenner of Duke with the subject line, “Evaluation of
Whether Benton County Wind Must Become a DIR,” in which she asks: “Can we please get this
evaluation in writing on MISO stationery? Thanks.” [Dkt. No. 60-18.] Ms. Jenner’s email neither
suggests an answer nor encourages MISO to reach a certain conclusion.

18

[Id. at 14 (citing Exhibit KK, Swez 30(b)(6) Dep. at 180).] This passage is far from clear,
but it is not disputed that Duke did not designate BCWF as a self-scheduled unit. [Id.
(citing Swez Dep. at 181-82).]
Duke asserts that “MISO required BCWF to register as a DIR and did not list ‘selfscheduling’ as an exemption to the DIR requirements.” [Dkt. No. 92-1 at 5-6.] Duke
additionally notes that facilities that were exempt from DIR were typically in service prior
to April 1, 2005 – a date not applicable to BCWF. [Id. at 4.] Duke notes that the parties
are in agreement that none of the DIR exemptions applied to BCWF. [Id. (citing Dkt. 792 at 5, April 16, 2012 letter from Marc Keyser to Diane Jenner 16).] According to Duke,
BCWF “failed to obtain 100% Network Resource Interconnection Service, which would
have exempted the Wind Farm from the DIR rules.” [See id. at 5.]
F.

Duke’s Performance Under the PPA.
As a preliminary matter, BCWF admits that Duke has always paid BCWF the

contract price for energy delivered to the Point of Metering. [Dkt. No. 55-1 at 11 (citing
Eisen Dep. 82:13-23; Shanker Dep. 119:9-15).] On this matter, there is no dispute.
1.

Problems Arising from Negative LMPs prior to the March 1, 2013
Reclassification of Wind Power as DIR.

Prior to wind energy’s reclassification as DIR in early 2012, Duke and BCWF
separately reached out to MISO to learn more about the DIR process, including details
relating to curtailments. [Dkt. No. 82-1 at 6.] In March 2012, Duke questioned why MISO

16

Both Marc Keyser and Diane Jenner are Duke employees. Neither party explains their
precise positions or titles with Duke.

19

was not curtailing the Wind Farm at that time. Duke employee John Swez noted in a March
21, 2012 email communication that before March 2012, MISO curtailed the Wind Farm
quite often even when LMPs were positive. [Ex. 23 to Jenner Dep.] However, when LMPs
became negative in March, MISO appeared to reduce the number of curtailments for a
period of time and did not increase the frequency or size of curtailments at that time. Thus,
Duke inquired of MISO in an effort to understand MISO’s process for handling
curtailments. Ms. Jenner explained that Duke was “making MISO aware that there were
significant negative LMPs at Benton County Wind Farm, and MISO didn’t seem to be
doing anything to take care of the significant LMPs there.” [Dkt. No. 82-1 at 7 (citing
Supp. App. 3, Jenner Dep. 178:12-16).]
On February 28, 2012, Mr. Swez sent an email to his Duke co-workers
recommending various solutions for dealing with negative LPMs:

...

20

[Dkt. No. 61-9.] A few weeks later, on March 14, 2012, Mr. Swez sent another email to
his co-workers explaining ways to address the negative LMPs. Mr. Swez’s email included
a memorandum that stated, in part:
During March, 2012, day ahead LMP at Benton County began clearing
negative, at times as low as -$50/MWhr during some hours. This means that
Duke Energy Indiana is selling energy from the Benton County facility at
negative (i.e. paying to generate). Due to the nature of the PPA, DEI pays
the fixed contract price to Benton County LLC and receives revenue from
MISO via payments from LMP. Due to the fact that LMP’s began to clear
negative, DEI has an interest to curtail the output of the generator and just
pay Benton County for the wind generation that was never generated. This
will save DEI money by avoiding selling at negative LMP.
[Dkt. No. 61-10.]
Duke did not pursue an amendment to the PPA to allow it to curtail BCWF’s output
when MISO set negative LMPs. On March 21, 2012, Duke employee, Diane Jenner,
addressed her concern and confusion over MISO’s failure to manually curtail BCWF’s
energy generation. In her email to Duke co-workers, Ms. Jenner stated:

21

[Dkt. No. 60-22.] On March 27, 2012, after learning that MISO had curtailed BCWF to
zero output, Ms. Jenner sent an email to Ron Snead (also a Duke employee) stating: “FYIMaybe our questions are getting some traction.” [Dkt. No. 60-23.] BCWF scheduled its
own meeting with MISO in March 2012 to inquire regarding MISO’s curtailment process
generally and curtailments specifically related to the Wind Farm. [Dkt. No. 82-1 at 6, 21
(citing McGraw Dep. at 227-29, Ex. 18).]
By the spring of 2012, Duke employees were considering whether there was
anything they “could do to limit the amount of money that [Duke] customers were paying
as a result of those negative LMPs.” [Jenner Dep. at 128-29.] In an email exchange
between Ms. Jenner and Mr. Neal, dated March 28, 2012, Ms. Jenner stated that she
“thought [Duke wasn’t] going to amend [the PPA] for curtailment rights but instead deal
with thru offers.” [Dkt. No. 60-25.] Mr. Neal responded, “That is my preference but the
Operating Guidelines cannot supersede the Agreement. If the Operating Agreement says
DEI cannot curtail then we would have to amend that statement.” [Id.] Ms. Jenner
responded that she “didn’t think [Duke was] going to ask to curtail but continue to have
MISO do it thru offer prices.” [Id.] At her deposition, Ms. Jenner stated that “at this point
in time, I believe we were thinking that the offer price could be used to mitigate negative
LMPs at [BCWF].” [Dkt. No. 60-24 (Jenner Dep. at 209).] Ms. Jenner also stated that she
and her colleagues understood that if Duke submitted an offer price of zero dollars, BCWF
would receive an order from MISO to reduce output whenever LMPs were negative. [Id.
at 130-31, 12-19.]

22

In response to data requests from the Indiana Utility Regulatory Commission
(“IURC”) regarding costs incurred at the Wind Farm, Duke noted in August 2012 that the
DIR process might alleviate the “negative revenues” Duke was paying to MISO:
In addition, assuming BCWF becomes a Dispatchable Intermittent Resource
(“DIR”) under MISO’s rules by the March 1, 2013 date, the Company
believes that the DIR construct will help alleviate the negative LMP situation
at BCWF. (Supp. App. 6, Swez Dep. 240:3-12; Supp. App. 12, Swez Dep.
Ex. 20, Response to SDI Data Request 4.8, IURC Cause No. 38707 FAC 93.)
[Dkt. No. 82-1 at 7.] 17
2.

Duke’s Offers to MISO.

Since MISO’s DIR rules took effect on March 1, 2013, Duke, in its role as the
Market Participant, has offered a price of $0/MWh for electrical output from the BCWF.
[Dkt. No. 55-1 at 12-13.] Duke’s $0/MWh offer reflects Duke’s willingness to pay BCWF
the PPA price, if MISO accepts the $0/MWh offer, but Duke is not willing to pay negative
LMPs for the power. [Id.] After Duke communicates its offers, MISO decides whether to
issue dispatch down signals. [Id. at 16 (citing Shanker Dep. at 243:6-15).] As explained
above, MISO is “running the market and clearing the price” and is the “traffic cop” to make
sure that the deliveries of generated power do not cause problems in the system. [Id. at 17
(citing Eisen Dep. at 49:17-22, 141:7-9).]

17

Although BCWF suggests that Duke’s consideration of an amendment to the PPA and
its questions to MISO are an indication of a breach of the PPA or a finding that Duke’s offers to
MISO under the DIR classification were unreasonable, we disagree. These facts do not
demonstrate a nefarious purpose on the part of Duke or an effort to circumvent the PPA or to
collude with MISO to avoid its contractual obligations.

23

In developing an offer price, Duke engaged in internal discussions among several
employees, including Ms. Jenner, Mr. Neal, and Mr. Swez, and based on their careful
consideration in balancing a variety of factors, Duke determined that a zero dollar offer to
MISO was appropriate and justifiable. Duke typically sets its offer price based on its
variable costs to run a unit – in this case, the PPA price. [Neal Dep. at 139.] As John
Swez, Duke’s Director, Generation Dispatch and Operations, testified:
I believe zero strikes the best balance between our customers and the PPA,
meaning that if it was out of purely doing this to benefit my customers, I
would offer $52 a megawatt hour, and purely to benefit Benton County Wind
Farm would be some max negative offer. I believe zero strikes the best
balance and zero represents what to me makes sense, in that if you are going
to generate electricity, you know, you would think that you would have a
positive value for that energy to be – to be paid – to be received. So if you’re
going to sell your product, you would think you will get a positive, you know,
greater than zero amount.
[Swez Dep. 215.] Kevin Neal explained that Duke’s obligation was to “manage [the]
MISO costs through prudent utility practice pursuant to our obligation to our ratepayers.”
[Neal Dep. 195.] Balancing Duke’s obligations to its ratepayers and its contractual
obligations to BCWF, Mr. Neal concluded that “zero was the most appropriate offer price.”
[Id. 173.]
Both BCWF’s expert witness, Dr. Shanker, and James Eisen, Vice President of
BCWF, have opined that Duke is required under the PPA § 6.2 to submit the maximum
negative offer price of negative $500/MWh to satisfy its obligation to reasonably cooperate
with BCWF. [Shanker Dep. at 210 (“If Duke has a take obligation to buy the output of the
plant, it shouldn’t impede the output of the plant and should offer the lowest possible
rate.”); Dkt. No. 55-1 at 13 (citing Shanker Dep. at 236 (“Duke’s obligations under the
24

PPA warrant Duke’s submission of the lowest allowable bid under the MISO tariff
(negative $500/Mwh).”)).] 18 Mr. Eisen testified with respect to Duke’s obligation under
the PPA to reasonably cooperate, as follows:
Q

. . . Is it Benton County’s position that in order for the parties to
reasonably cooperate with each other, Duke is required to submit the
maximum negative bid to MISO?

A

I think – yes. With respect to this – this provision, yes, I would – that’s
my interpretation of that.

Q

So to reverse that, if Duke submits any bid other than the maximum
negative offer, then Benton County would argue that is not reasonable
cooperation under this contract?

A

Correct.

[Eisen Dep. 153:11-22 (emphasis added).] On the other hand, if Duke had no take-or-pay
obligations, then, according to Mr. Shanker, Duke’s offers would be equal to “the contract
price.” [Dkt. No. 55-1 at 14 (citing Shanker Dep. at 209).]
Since March 1, 2013, there have been times when MISO accepted Duke’s $0/MWh
offer. However, when the LMPs at BCWF’s location fall below Duke’s offer price, MISO
typically opts to reduce BCWF’s output. As a result, since March 1, 2013, BCWF’s output
has declined by approximately 50%.

18

As BCWF’s expert Dr. Shanker notes, generators may choose to continue to generate
power when LMPs are below zero for a variety of reasons. [Dkt. 56-3, Shanker Report at 21-22,
¶¶ 34-35.] For example, a generator may continue to operate when it is receiving payments, such
as Production Tax Credits (“PTCs”), from the federal or local government that exceed the marginal
cost of production from a facility. “When this happens, these outside payments make it profitable
to sell at a negative price in order to gain the federal or state credit.” [Id. ¶ 35.] In the case of the
Wind Farm, Duke does not receive any PTCs, so it is not profitable for Duke to sell at a negative
price and any losses must be borne by Duke and/or passed on to Duke’s ratepayers.

25

During the time period between March 1, 2014 and September 30, 2014, the LMP
was greater than zero 80% of the time and no dispatch down occurred over 62% of the
time. During the time when Duke submitted its zero dollar offers, MISO cleared the Wind
Farm approximately 59% of the time. The Wind Farm generated a minimum amount of
power. When this power was produced during a time when MISO had set negative LMPs,
Duke paid MISO the negative LMP despite Duke’s offer. Through March 31, 2014, the
total amount Duke paid in negative LMPs during the DIR process, when it was making
zero dollar offers that did not clear, was $666,324.93. [Swez Aff. at ¶ 12.]
G.

The Pending Litigation.
Following the adoption of the DIR classification by MISO for wind energy and

Duke’s submission of $0/MWh bids, BCWF’s electrical output and revenues have
continually declined, bringing the company to the verge of default on its debt. BCWF
blames Duke’s breach of its obligations under to the PPA and the JESOA for BCWF’s
declining revenues. On December 16, 2013, BCWF filed the Complaint in this action in
which BCWF alleges that Duke was obligated under the parties’ agreements not to curtail
the Wind Farm’s output, to procure the necessary transmission services, and to pay
liquidated damages when it failed to accept BCWF’s electric power. BCWF contends that,
when Duke made $0/MWh offers to MISO and failed to procure transmission services,
Duke breached the parties’ agreements and further breached those agreements when it
failed to pay BCWF liquidated damages which resulted in BCWF’s losses. Duke denies
having breached the PPA or JESOA and any liability for BCWF’s losses as a result of the
wind energy’s DIR classification.
26

Summary Judgment Standard
Summary judgment is appropriate when the record before the Court establishes that
there is “no genuine issue as to any material fact and that the moving party is entitled to
a judgment as a matter of law.” Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986). Disputes concerning material facts are genuine where the
evidence is such that a reasonable jury could return a verdict for the non-moving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In deciding whether genuine
issues of material fact exist, the Court construes all facts in a light most favorable to the
non-moving party and draws all reasonable inferences in favor of the non-moving
party. Id. at 255. When, as in this case, the parties have filed cross-motions for summary
judgment, “‘we construe the evidence and all reasonable inferences in favor of the party
against whom the motion under consideration is made.’” Cavin v. Home Loan Center, Inc.,
531 F.3d 526, 528-29 (7th Cir. 2008) (quoting Premcor USA v. Am. Home Assurance
Co., 400 F.3d 523, 526 (7th Cir. 2005)). However, neither the “mere existence of some
alleged factual dispute between the parties,” nor the existence of “some metaphysical
doubt as to the material facts,” will defeat a motion for summary judgment. Michas v.
Health Cost Controls of Ill., Inc., 209 F.3d 687, 692 (7th Cir. 2000) (internal citations
omitted).
The moving party “bears the initial responsibility of informing the district court
of the basis for its motion, and identifying those portions of [the record] which it believes
demonstrate the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 323.
The party seeking summary judgment on a claim on which the non-moving party bears the
27

burden of proof at trial may discharge its burden by showing an absence of evidence to
support the non-moving party’s case. Id. at 325; Doe v. R.R. Donnelley & Sons, Co.,
42 F.3d 439, 443 (7th Cir. 1994). Summary judgment is not a substitute for a trial on
the merits, nor is it a vehicle for resolving factual disputes. Waldridge v. Am. Hoechst
Corp., 24 F.3d 918, 920 (7th Cir. 1994). But, if it is clear that a plaintiff will be unable
to satisfy the legal requirements necessary to establish his or her case, summary judgment
is not only appropriate, but mandated. Celotex, 477 U.S. at 322; Ziliak v. AstraZeneca LP,
324 F.3d 518, 520 (7th Cir. 2003).
Courts are often confronted with cross-motions for summary judgment, as is the
case here, because Rules 56(a) and (b) of the Federal Rules of Civil Procedure allow both
plaintiffs and defendants to move for such relief. “‘In such situations, courts must consider
each party’s motion individually to determine if that party has satisfied the summary
judgment standard.’” Midwest Title Loans, Inc. v. Ripley, 616 F. Supp. 2d 897, 902 (S.D.
Ind. 2009) (quoting Kohl v. Ass’n. of Trial Lawyers of Am., 183 F.R.D. 475 (D.Md.1998)).
“When evaluating each side’s motion the court simply ‘construe[s] all inferences in favor
of the party against whom the motion under consideration is made.’”

Morgan v.

Fennimore, Cause No. 1:09-cv-399-SEB-TAB, 2010 WL 5057418, at *1 (S.D. Ind. Dec.
3, 2010) (quoting Metro. Life Ins. Co. v. Johnson, 297 F.3d 558, 561–62 (7th Cir. 2002)
(quoting Hendricks–Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir.1998))).

28

Analysis
A.

Summary of the Parties’ Dispute.
The dispute between the parties in this litigation boils down to a determination of

their existing contractual relationship in view of significant changes in the manner of wind
energy production and distribution that have occurred following the execution of their
long-term agreement. When the parties entered into the PPA (and commenced performing
their obligations thereunder), BCWF was the sole wind farm in the Benton County
(Indiana) area. As previously noted, after BCWF began generating energy for Duke’s
purchase, several additional wind farms entered the market area, which ultimately caused
electrical transmission lines to be congested and gave rise to the need for manual generation
curtailments. For a period of time, because the Wind Farm was a “must run” facility, Duke
suffered a negative fiscal impact of the oversupply of energy based on the negative LMPs.
However, after wind energy was re-classified as DIR, the negative impact of the additional
wind energy generation shifted to BCWF who was faced with curtailment orders from
MISO, requiring it to decrease its output by approximately 41%.
Two intertwining legal issues have arisen under the PPA as a result: First, does the
PPA’s requirement that Duke “reasonably cooperate” with BCWF when bidding power
require Duke to perform its obligations in such a way that its bids result in BCWF’s
maximum production of electricity? Second, when Duke makes bids to MISO that result
in the curtailment of BCWF’s production, is Duke indirectly violating the PPA’s
prohibition against Duke’s curtailment of BCWF’s output? The answers to these questions
turn on whether the PPA is properly construed as an output contract or a take-or-pay
29

contract, the latter requiring Duke to purchase all the power BCWF was (is) capable of
producing.
BCWF seeks by this litigation to compel Duke to purchase all the power BCWF is
able to generate, thereby forcing Duke to make aggressive bids to MISO in order to
maximize BCWF’s output and the benefits of its bargain under the PPA.

BCWF

summarizes its position in this way: “BCWF contends that the PPA requires Duke to
either: (i) do what is necessary to ensure that BCWF can generate power (whether through
its offer prices, or by procuring Transmission Services, or by self-scheduling the wind
farm); or (ii) if it chooses none of the above, pay BCWF liquidated damages.” [Dkt. No.
86 at 25.] BCWF contends that Duke is improperly “shift[ing] the market risk allocation
agreed to when the fixed price contract was negotiated.” [Id. at 29 (citing N. Ind. Publ.
Serv. Co. v. Carbon County Coal Co., 799 F.2d 265, 278 (7th Cir. 1986)) (“As we have
already noted, a fixed-price contract is an explicit assignment of the risk of market price
increases to the seller and the risk of market price decreases to the buyer, and the
assignment of the latter risk to the buyer is even clearer where, as in this case, the contract
places a floor under [the] price but allows for escalation.”).]
Duke, in response, interprets the PPA to provide a legitimate means of shielding
itself from the effect of excessive negative LMPs resulting from the congested wind energy
transmission lines. Duke agreed in the PPA to pay for a specific amount of wind energy
generated by BCWF (the Electrical Output) measured at a specific point (the Point of
Metering). Consequently, if Duke’s reasonable offers to MISO are not accepted and MISO
curtails BCWF’s generation, Duke maintains that it is not obligated to pay for deemed
30

generation – i.e., generation that does not meet the definition of Electrical Output. So long
as Duke purchases all of BCWF’s “Electrical Output,” Duke is not liable to BCWF for
liquidated damages. Since the PPA requires Duke to purchase only the energy that reaches
the Point of Metering, which it has consistently done, it has paid for all of the power it was
obligated to purchase under the PPA.
Neither party argues that performance under the PPA is impractical or that the
purpose of the PPA has been frustrated by the changing wind energy landscape. Nor does
either party contend that the PPA is void or voidable. In fact, neither party seeks to revise
or amend the contract. 19 Despite their disagreement over the proper interpretation of the
PPA, both parties seek to affirm what they characterize as their unambiguous agreement
so they can pursue their rights thereunder.
We conclude, as explained in detail below, that Duke did not breach its agreement
under the PPA or the JESOA. The parties agreed that Duke would purchase “Electrical
Output” delivered to the “Point of Metering,” which Duke has done; and that Duke would
make reasonable offers to MISO, which Duke has done; and that Duke would not curtail
BCWF’s production, which Duke has not done. The difficulty in interpreting and enforcing
this agreement stems primarily from the fact that, in major respects, events have passed it
by. The parties’ contract no longer mirrors the parties’ commercial/economic needs and
19

Duke’s argument that “an unanticipated benefit to one party is not a sufficient ground
for [the court] to rewrite the contract” is well-taken although not entirely relevant here. [See Dkt.
No. 82-1 at 15-16) (citing Caisse Nationale de Credit Agricole v. CBI Indus, Inc., 90 F.3d 1264,
1274 (7th Cir. 1996)).] BCWF is not attempting to rewrite the contract; rather, it asks us to apply
the PPA in an advantageous way to BCWF so it can avoid the contractually unanticipated reduction
in production.

31

expectations or the realities of the much expanded and more complex marketplace. For the
Court to conclude that the PPA is an output contract requiring Duke to purchase all
BCWF’s output without regard to the effect of negative LMPs or MISO’s curtailment
orders, we would need to rely on extrinsic evidence. Because the parties have stipulated
that the PPA is unambiguous, we are constrained to apply the plain terms of the contract,
giving no consideration to the abundance of extrinsic evidence the parties have adduced in
briefing the pending motions.
B.

Contract Application and Interpretation.
“Where there are no genuine issues of material fact, contract interpretation is

particularly well-suited for summary judgment.” Allstate Ins. Co. v. Tozer, 392 F.3d 950,
952 (7th Cir. 2004); see also Eckart v. Davis, 631 N.E.2d 494, 497 (Ind. Ct. App. 1994)
(holding that the interpretation or legal effect of a contract is a question of law to be
determined by the court). 20 “A plaintiff moving for partial summary judgment on the issue
of liability in a breach of contract claim initially must ‘show’ only that there is no genuine
issue of fact regarding the liability elements of its claim.” Pantry, Inc. v. Stop-N-Go Foods,
Inc., 796 F. Supp. 1164, 1167 (S.D. Ind. 1992). A defendant is liable for breach of contract
where the plaintiff establishes that: “(1) a contract existed; (2) the defendant breached the
contract; and (3) the plaintiff suffered damage resulting from the breach.” Nikish Software
Corp. v. Manatron, 801 F. Supp. 2d 791, 800 (S.D. Ind. 2011). Conversely, a defendant is

20

The contracts at issue contain a choice of law provision mandating that Indiana law
applies to any dispute between the parties. [PPA § 17.8; JESOA § 8.8.] Thus, we have applied
Indiana law in resolving the dispute before us.

32

entitled succeed on summary judgment where it demonstrates that plaintiff cannot prove at
least one essential element of its case. See, e.g., Moss v. Crosman Corp., 136 F.3d 1169,
1175 (7th Cir. 1998) (“We therefore agree with the district court that [plaintiff] cannot
prove one essential element of their case . . . and that in turn makes summary judgment for
the defendants appropriate.”).
The primary purpose of contract construction is to determine the “mutual intention
of the parties.” Hutchinson. Shockey, Erley & Co. v. Evansville–Vanderburgh Cty. Bldg.
Auth., 644 N.E.2d 1228, 1231 (Ind. 1994). Such intent is discerned as of the time the
contract was made and by considering the language used by the parties to express their
rights and duties. INB Banking Co. v. Opportunity Options, Inc., 598 N.E.2d 580, 582 (Ind.
Ct. App. 1992). The first step in discovering intent is to gather meaning from the “four
corners” of the written document. Kutche Chevrolet-Oldsmobile-Pontiac-Buick, Inc. v.
Anderson Bank. Co., 597 N.E.2d 1307, 1309 (Ind. Ct. App. 1992). Courts must give words
their plain and usual meaning, unless review of the contract as a whole reveals some other
meaning was intended. INB Banking Co., 598 N.E.2d at 582. We may not construe
unambiguous language to give it anything other than its clear, obvious meaning, and we
may not add provisions to a contract that were not placed there by the parties. Simon Prop.
Group, L.P. v. Michigan Sporting Goods Distrib., Inc., 837 N.E.2d 1058, 1070 (Ind. Ct.
App. 2005) (citing Art Country Squire, L.L.C. v. Inland Mortg. Corp., 745 N.E.2d 885, 889
(Ind. Ct. App. 2001)). “Absent a provision to the contrary, a contracting party takes the
risk of most supervening changes in circumstances, even though they upset basic
assumptions and unexpectedly affect the agreed exchange of performances, unless there is
33

such extreme hardship to justify relief due to impracticability of performance or frustration
of purpose.” 27 Williston on Contracts § 70:77 (4th ed.) (citing Restatement (Second) of
Contracts § 154(a)).
As previously noted, the parties agree that the contracts at issue (the PPA and
JESOA) are not ambiguous and that the contract language is clear. [Dkt. No. 63 (BCWF
Opening Br. at 5, n.5) (citing Acuity Mu. Ins. Co. v. T&R Pavement Markings, Inc., No.
1:10-cv-00239-SEB, 2011 WL 2472246, at *4, *6 (S.D. Ind. June 21, 2011) (“[B]ecause
the terms of the PPA and JESOA are clear and unambiguous, the Court need not consider
extrinsic evidence to grant this motion.”); Dkt. No. 102 (BCWF Surreply at 3-4) (“BCWF
believes the Court can and should decide summary judgment based on the express terms
of the parties’ contractual agreements . . . ,” citing Indiana law that custom and practice
evidence is extrinsic to the parties’ agreement); Dkt. No. 55-1 (Duke Opening Br. at 19)
(“Where the terms of a contract are clear and unambiguous, they are conclusive and the
court will not construe the contract or consider extrinsic evidence but [will] merely apply
the contractual provisions.”) (citing Eckart v. Davis, 631 N.E.2d 494, 497 (Ind. Ct. App.
1994)); Dkt. No. 82-1 (Duke Resp. Br. at 12) (“Because BCWF is correct that the terms of
the PPA and JESOA are clear and unambiguous, it follows that witness testimony
interpreting the terms of agreements is unnecessary . . . .”); Dkt. No. 92-1 (Duke Reply at
10) (“Dr. Shanker provided no support for this assertion, but it is irrelevant since the Court
need only look at the PPA to conclude that Duke is obligated to pay only for the power
delivered.”).]

34

Where the terms of a contract are clear and unambiguous, they are conclusive and
the court will not construe the contract or consider extrinsic evidence but will merely apply
the contractual provisions. Eckart, 631 N.E.2d at 497. Witness testimony regarding
interpretation of a contract is not to be permitted because it could invade the province of
the court. Landmark Builders, Inc. v. Cottages of Anderson, LLP, No. IP 01-C-1592-CM/S, 2003 WL 21508118, *2 (S.D. Ind. May 20, 2003); see also U.S. v. Lupton, 620 F.3d
790, 799-800 (7th Cir. 2010) (“The court was correct in noting that the meaning of statutes,
regulations, and contract terms is a ‘subject for the court, not for testimonial experts. The
only legal expert in a federal courtroom is the judge.”).
Despite their agreement that the contract is clear and unambiguous, both parties
nonetheless submitted substantial extrinsic evidence regarding the meaning of the contract
and the parties’ contractual intent – none of which may we properly consider if the contract
is truly unambiguous. For example, Duke cites BCWF’s witnesses’ interpretation of the
PPA on the issue of whether the contract is to be considered a “take or pay” contract. [Dkt.
No. 55-1 at 9-10; Dkt. No. 92-1 at 3 (refuting BCWF’s characterizations of Duke’s
witnesses and highlighting BCWF’s expert’s testimony); Dkt. No. 55-1 at 23; Dkt. No. 821 at 12-13.] BCWF details statements from Duke’s representatives that, according to
BCWF, “confirm” that the PPA is a “take or pay” contract for a “must run facility” [Dkt.
No. 86 at 7-8; Dkt. No. 63 at 8-9; Dkt. No. 98 at 3; see generally Dkt. No. 86 at 16-17],
which statements Duke predictably attempts to explain away [Dkt. No. 82-1 at 12-13; Dkt.
No. 92-1 at 8]. Both parties have also adduced expert witness opinion as to the meaning
of “take or pay” contracts, and, no surprise, the experts have proffered conflicting opinions.
35

BCWF references statements made by Duke during the IURC approval when Duke
sought to recover from its customers the payments it had made based on the PPC. [Dkt.
No. 63 at 8-9.] 21 Duke has supplemented and explained those statements in its response.
[Dkt. No. 82-1 at 5.] Further, BCWF cites communications among Duke employees
relating to “Behind the Meter Generation” (BTMG) designations that relate to adoption of
the new DIR rules as well as Duke’s alleged desire that BCWF not be designated as BTMG.
[Dkt. No. 63 at 15.] Duke outlined possible ways in which BCWF might have mitigated
its damages [Dkt. No. 82-1 at 10; Dkt. No. 92-1 at 5], while BCWF explained that it
contributed $4 million to upgrade transmission lines [Dkt. 63 at 16]. None of these facts
or theories are relevant, however, given the parties’ stipulation that the contracts at issue
are unambiguous. We simply are not permitted to consider this evidence in applying the
unambiguous contract terms to the parties’ dispute. 22

21

Indeed, BCWF cites the IURC’s December 6, 2006 order approving the PPA as support
for its position that Duke could recover its negative LMP costs from its customers. [Dkt. No. 63
at 9.] Duke responds that to recover negative LMPs from its customers, Duke must go through
separate IURC proceedings to demonstrate its prudent utility practices to manage costs. [Dkt. No.
82-1 at 4.]
22

Duke seeks “to strike the extrinsic evidence submitted by BCWF because extrinsic and
parole evidence is inadmissible to interpret an unambiguous contract.” [Dkt. No. 82-1 at 12, n.4;
see also Dkt. No. 92-1 at 10, n.3 (“As it did in its Response Brief, Duke moves to strike BCWF’s
extrinsic evidence.”).] We deny Duke’s request primarily on procedural grounds. Motions to
strike are disfavored. Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir.
1989). Additionally, Southern District of Indiana Local Rule 7-1(a) requires that all motions be
filed separately. “A motion must not be contained within a brief, response, or reply to a previously
filed motion, unless ordered by the court.” S.D. Ind. L.R. 7-1(a). Moreover, Local Rule 56-1(i)
provides that “[t]he court disfavors collateral motions – such as motions to strike – in the summary
judgment process. Any dispute over the admissibility or effect of evidence must be raised through
an objection within a party’s brief.” While we will not entertain Duke’s footnote motion, its
objection is well taken. Both parties have submitted parole evidence in support of their motions

36

C.

The PPA is Not a Take-or-Pay Contract that Requires Duke to Pay for Deemed
Generation.
The parties extensively debate whether the PPA is a so-called “take-or-pay

contract,” i.e., an agreement by which Duke is required to take all of the power that has
been or could have been generated by BCWF or otherwise pay for all of the power that
could have been generated by BCWF. 23 BCWF defines a “take or pay” contract as one
which “require[s] a buyer to purchase or pay for all of the seller’s output, even when it is
unprofitable to do so or the buyer does not have use for the seller’s commodity.” [Dkt. No.
86 at 16.] The plain language of the PPA establishes that it is not a take-or-pay contract in
the sense that Duke must pay for “deemed generation;” it is, instead, a take-or-pay contract
in the sense that Duke must pay for all of BCWF’s actually generated and delivered
Electrical Output.
1.

PPA Defined Terms.

The expressly-defined terms in the PPA establish that Duke is obligated to accept
and pay for only the Electrical Output delivered to the Point of Metering. Duke’s

for summary judgment while arguing that the PPA and JESOA are unambiguous. We have
disregarded all extrinsic evidence in applying the plain language of the contracts at issue.
23

The record reflects that Duke representatives often referred to the PPA as a “take-or-pay
contract.” [See, e.g. Dkt. No. 60-17, Ex. Q (E-mail from Swez, Apr. 27, 2008) (“Due to the fact
that this contract is a ‘take or pay’ contract, we are not able to offer the unit with any sort of
‘dispatchability’. I.E., [sic] when the unit is out of the money (when the unit LMP is less that [sic]
about $45/MWhr currently), we still must take all generation.”).]. Duke has explained this and
other testimony to mean that “[Duke] take[s] the output of energy as delivered by – as received
from Benton County and we pay Benton County for that energy and sell it to MISO.” [Dkt. No.
80 at 6 (citing Swez Dep. at 123).] The parties’ characterizations of the contract are ultimately
irrelevant, however, because our task is simply to apply the unambiguous terms of the agreement
without consideration of extrinsic evidence.

37

obligations to accept and purchase wind energy from BCWF are repeatedly described in
the PPA by the defined term “Electrical Output.” The PPA defines “Electrical Output” as
the “entire electric energy output of the Plant delivered to the Point of Metering.” [PPA at
4.] The parties defined “Point of Metering” as the “interconnection point with NIPSCO
and/or RTO.” [Id. at 6.] As discussed supra, nowhere in the PPA is Electrical Output
defined to include “deemed generation.”
Section 4.1, for example, requires Duke to “accept and purchase from the Seller
(a) Electrical Output of the Plant,” and Section 4.4 requires Duke to pay BCWF “for the
Electrical Output and Credits at a price per MWh of Electrical Output delivered to Buyer
at the Point of Metering.” Section 4.5 reiterates that “[a]ll Electrical Output will be
measured at the Point of Metering,” and Section 4.6 provides remedies if Duke “fails to
accept delivery of all of the Electrical Output at the Point of Metering.” We cannot ignore
or attempt to explain away the clear, consistent, and repeated use of these PPA terms,
“Electrical Output” and “Point of Metering,” so as to revise Duke’s purchase obligations
to be a “deemed generation” requirement as BCWF requests. The PPA is quite clear that
Duke’s obligation to purchase generated power is defined in terms of Electrical Output and
nothing else.
Although BCWF contends that the PPA requires Duke to purchase all of the wind
energy it could generate (similar to an output contract), the PPA lacks crucial terms to
evidence such an agreement by the parties. Most conspicuously, the PPA lacks terms to
explain or impose a method of calculating deemed generation, nor does it provide a
minimum amount of energy for which Duke was obligated to compensate BCWF under
38

the contract. See Lake River Corp. v. Carborundum Co., 769 F.2d 1284, 1292 (7th Cir.
1985) (“Such [take or pay] clauses require the customer, in consideration of the pipeline’s
extending its line to his premises, to take a certain amount of gas at a specified price – and
if he fails to take it to pay the full price anyway.”); Midcon Corp. v. Freeport-McMoran,
Inc., 625 F. Supp. 1475 (N.D. Ill. 1986) (“Under a take-or-pay contract, the pipeline
company must take a certain minimum quantity of gas per year, or else be liable for the
difference between that quantity and the quantity actually taken.”). The parties have not
included terms in their agreements relating to a minimum quantity of energy generation or
an equation to calculate deemed generation for which Duke is liable. 24 Further, the parties
omitted any agreement requiring Duke to take all of the maximum-rated capacity of
BCWF’s production. The parties instead merely agreed that Duke was obligated to accept
and pay for “Electrical Output,” which was defined in the PPA as the energy generation
measured at the Point of Metering.
2.

PPA Section 4.6.

BCWF urges us to interpret the PPA in a way that imposes a requirement on Duke
to pay for deemed generation based specifically on Section 4.6 of the PPA, which relates
to remedies for Buyer’s breach and liquidated damages. Section 4.6 provides:

24

BCWF argues that Section 15.4 of the PPA provides a method for calculating damages
for deemed generation. Section 15.4 relates to termination of the PPA, not a breach of the PPA.
[PPA § 15.4 ( “Damages Payable in the Event of Termination” and specifically provides “in the
case of a termination by Seller due to an Event of Default by Buyer, . . . .”).] Section 15.4 provides
that Electrical Output is calculated using projections based on historical performance or an
independent wind resource consultant depending on the timing of the termination. No evidence in
the record demonstrates that either party has terminated or seeks to terminate the PPA.

39

(a)

In the event that the Buyer fails to accept delivery of all of the
Electrical Output at the Point of Metering, whether due to Buyer’s
failure to obtain Transmission Service (if applicable) or for any reason
other than Seller’s failure to perform, an Emergency Condition, a
Force Majeure Event that prevents such acceptance pursuant to
Article 14 or the proper exercise by Buyer of its suspension rights
pursuant to Section 15.2(a), then Buyer shall pay to Seller as
liquidated damages an amount equal to the positive difference, if any,
between (i) (x) the amount that would have been payable by Buyer to
Seller hereunder if such Electrical Output had been accepted by Buyer
plus (y) additional transmission charges, if any, reasonably incurred
by Seller in delivering the Electrical Output to such third party
purchaser and (ii) the net amount, if any, that Seller, using
Commercially Reasonable Efforts, actually realizes through
remarketing of such Electrical Output to Persons other than the Buyer,
provided that in the event Seller is unable to remarket such Electrical
Output, then the net amount described in clause (ii) shall be $0 and
the damages owed by Buyer shall also include the then-current
amount of the PTC 25 (on a per MWh basis) on an After-Tax Basis for
each MWh of such Electrical Output that Seller was unable to
remarket The damages provided in this Section 4.6 shall be the sole
and exclusive remedy of Seller for any failure of Buyer to accept
delivery of Electrical Output that it is required to accept thereunder.

[PPA at § 4.6.] The plain language of § 4.6 provides that this section is applicable only if
and when Duke fails to accept delivery of all Electrical Output at the Point of Metering.
BCWF advances three arguments based on Section 4.6 in support of its position that
Duke is liable for deemed generation. First, BCWF maintains that power is automatically
accepted at the Point of Metering and, as a result, Section 4.6 necessarily refers to deemed
generation because Duke cannot refuse to accept power at the Point of Metering. Second,
BCWF argues that because it receives PTCs (Production Tax Credits) when it generates
electricity, the inclusion of PTCs as damages demonstrates that Section 4.6 is applicable to

25

“PTC” stands for Production Tax Credit.

40

deemed generation. Third, because Section 4.6 clearly includes safe harbor provisions for
Force Majeure and Emergency Conditions, and those events occur when BCWF cannot
produce power, Section 4.6 relates to deemed generation. We find none of these arguments
persuasive in deciding whether Duke is obligated to purchase power that is deemed
generated.
a.

Automatic Acceptance of Power at the Point of Metering.

BCWF maintains that because BCWF-generated electricity “immediately travels
through wires at the speed of light, past the Point of Metering, and into MISO’s electrical
grid,” Duke cannot prevent generated power from passing the Point of Metering and Duke
cannot physically reject (or fail to accept) generated power. [See Dkt. No. 86 at 20
(emphasis added).] Stated differently, generated electricity cannot be halted at the Point
of Metering awaiting acceptance. Duke agrees that once power is generated, Duke has no
way to prevent its flow into the grid. [See Dkt. No. 63 at 23 (citing Swez Dep., Neal Dep.,
and Jenner Dep.).] According to BCWF, because Duke cannot decline to accept generated
power, Section 4.6’s liquidated damages provision makes sense only if read to refer to
damages resulting from instances when BCWF is prevented from generating power.
BCWF presses for an interpretation of the PPA that holds Duke liable for deemed
generation because, it says, Duke cannot as a practical matter “reject” power at or after the
Point of Metering. This interpretation, however, discards the parties’ contractually-defined
terms, “Electrical Output” and “Point of Metering.” These two terms define the measure
of power which Duke must accept and compensate BCWF. When read as a whole, the oftrepeated terms in the PPA, “Electrical Output” and “Point of Metering,” do not support
41

BCWF’s interpretation. Moreover, BCWF’s proposed interpretation is also inconsistent
with the remaining portions of Section 4.6.
BCWF’s proposed interpretation ignores the provisions of Section 4.6 that provide
mechanisms by which BCWF could mitigate its damages by remarketing “Electrical
Output” (again, defined as the energy reaching the Point of Metering) to buyers other than
Duke. It is clear that the parties envisioned a system by which Duke could fail or refuse to
accept power, in which event BCWF could deliver power to another buyer (Vectren, for
example) to mitigate its damages resulting from Duke’s failure to accept the Electrical
Output. [See PPA § 4.6 (contemplating BCWF selling Electrical Output to a buyer other
than Duke which by its terms relates to actual generated power, not hypothetical deemed
generation).] Even if a mistake (mutual or otherwise) informed the PPA language relating
to the actual process of electricity flow from BCWF to the grid, because both parties assert
that their contract is neither ambiguous nor that it embodies a mistake, any such error would
at most render the PPA void or voidable. 26 To the extent a supervening change in
circumstances occurred following the execution of the PPA that casts the parties’
contractual assumptions in a different light, that risk was assumed by the parties. We are
not at liberty to rewrite their agreement to accommodate such a change in circumstance

26

BCWF reiterates its position that the PPA is not ambiguous, while suggesting that the
Court should interpret it in a fashion that “harmonize[s] the contract’s provisions.” [See Dkt. No.
86 at 28.] We need not perform this task (assuming we even grasp how the parties would have us
do so) of harmonizing contract provisions since the parties both maintain that the PPA is not
ambiguous. Our role here, we repeat, is limited to applying the contract’s terms as written.

42

under the guise of interpreting it, particularly where the contract is not ambiguous. 27
Williston on Contracts § 70:77.
BCWF’s proposed reading of Section 4.6 is inconsistent with the explicit terms of
the PPA and does not reflect the parties’ stated intentions. BCWF’s take on this provision
ignores the definitions of the terms, “Electrical Output” and “Point of Metering,” and
ignores the parties’ agreement that if Duke fails to accept Electrical Output generated by
BCWF, BCWF is obligated to mitigate its damages by undertaking to sell the energy to a
different buyer. 27 Nothing in Section 4.6 supports an interpretation that the parties intended
for Duke to pay BCWF for deemed generation.
b.

Production Tax Credits As Liquidated Damages.

BCWF further contends that because the parties included Production Tax Credits as
a component of liquidated damages flowing from Buyer’s breach, Section 4.6 is properly
construed as applicable when BCWF is unable to produce electricity [See Dkt. No. 63 at
23.] Because it earns PTCs whenever it generates energy, BCWF contends there is no

27

We are not persuaded by Duke’s argument that it “can fail to accept delivery of Electrical
Output by failing to pay for the Electrical Output.” [Dkt. No. 82-1 at 27.] In the same way the
parties’ included the defined terms, “Electrical Output” and “Point of Metering,” the parties could
have incorporated the term “pay” in Section 4.6, but chose instead to use the term “accept.” This
is a relevant distinction. Section 4.4 of the PPA relates to Duke’s obligations to pay for the power
it accepts – a provision that would be superfluous if Section 4.6 is interpreted to refer to Duke’s
obligation to pay for power as being synonymous with acceptance. Moreover, liquidated damages
are “generally enforceable where the nature of the agreement is such that damages for breach
would be uncertain, difficult, or impossible to ascertain.” Weinreb v. Fannie Mae, 993 N.E.2d
223, 232-33 (Ind. Ct. App. 2013). If Duke simply failed to pay for the energy it accepted,
liquidated damages would be unnecessary because it would be relatively easy to calculate the loss
amount. We are not persuaded that the parties intended liquidated damages to be payable to BCWF
when and if Duke failed to pay for power it had accepted from BCWF.

43

logical explanation for including PTCs as a form/component of liquidated damages unless
PTCs are viewed as damages based on deemed generation. [Id.]
As Duke notes in response, parties to a contract are free to include a provision in
their contract that provides for PTCs to benefit BCWF, even if BCWF might secure PTCs
in some other way. The parties may define the terms of their contract, indeed, to award
BCWF a “double recovery,” if Duke fails to accept power generated by BCWF. See, e.g.
Harris v. Primus, 450 N.E.2d 80, 84 (Ind. Ct. App. 1983) (“Absent any evidence to show
that the amount of damages claimed is unreasonable, such a stipulation for liquidated
damages will be acceptable.”); Weinreb, 993 N.E.2d at 232-33 (“While liquidated damages
clauses are ordinarily enforceable, contractual provisions constituting penalties are not.
The distinction between a penalty provision and one for liquidated damages is that a
penalty is imposed to secure performance of the contract and liquidated damages are to be
paid in lieu of performance.”) (citations omitted). 28 The inclusion of the liquidated
damages provision in the PPA does not imply liability based on Section 4.6 against Duke
for deemed generation.

28

In support of its position, BCWF misquotes Duke’s witness. BCWF contends that
“[t]here is no dispute that BCWF earns PTCs whenever it generates energy.” [Dkt. No. 63 at 23.]
What Mr. Swez actually said was:
Q. You don’t get PTCs unless you actually generator [sic] electricity; right?
A. That is correct.
[Swez Dep. at 207.] This statement does not establish BCWF’s entitlement to receive
PTCs whenever it generates electricity. While generation is a prerequisite to receiving a PTC,
generation may not be the only requirement for getting a PTC, according to this testimony.

44

c.

Force Majeure and Emergency Safe Harbor Provision.

Section 4.6 also provides that Duke is not liable for liquidated damages where its
failure to accept energy is the result of a Force Majeure or Emergency Condition. BCWF
contends that the Force Majeure and Emergency Conditions in Section 4.6 contemplate
situations where BCWF is unable to generate power. Thus, unless Duke is obligated under
the PPA to pay for deemed generation, these safe harbor provisions are superfluous. [Dkt.
No. 63 at 24.] Stated differently, BCWF contends that if Duke has no obligation to
purchase power unless it passes the Point of Metering, no basis exists to warrant these safe
harbor provisions.
BCWF’s position is premised on its characterization that Article 14 (“Force
Majeure”) and specifically Section 14.1(a) includes only “situations in which BCWF is
unable to generate power.” [See id.] Contrary to BCWF’s interpretation, Section 14.1(a)
also references failures of NIPSCO and MISO to install Interconnection Facilities as well
as labor strikes (not limited only to BCWF workers) as situations during which Duke would
not be liable for liquidated damages if it failed to accept BCWF’s generation of power.
Duke provides the example of an unexpected failure of a transmission line as an emergency
condition in which Duke would not accept power, and for which it would not be liable in
liquidated damages. [Dkt. No. 82-1 at 28.] We need not attempt to imagine every possible
situation in which a Force Majeure or Emergency Condition might excuse Duke from
paying liquidated damages. Suffice to say, there are others in addition to the one advanced

45

by BCWF. The Force Majeure provisions in Article 14 of the PPA are not superfluous and
do not create an obligation for Duke to pay for deemed generation under the PPA. 29
3.

Reasonable Cooperation Requirement.

If the PPA is a take-or-pay contract, as BCWF contends, the contractual requirement
that Duke reasonably cooperate with BCWF with respect to bidding power into the MISO
grid lacks a purpose. [PPA § 6.2.] As discussed infra, BCWF maintains that Duke’s
obligation under the PPA is to bid an amount which would result in BCWF operating at
the maximum level (i.e., not being subject to MISO curtailment orders). If Duke is
obligated to purchase all the power that BCWF could ever generate (under a take-or-pay
theory), then BCWF’s interpretation of Section 6.2 requiring Duke to make maximum bids
is at best redundant and at worst contradictory. Under BCWF’s theory, Duke is required
to pay for deemed generation regardless of whether MISO curtails its production. If true,
there is no basis for requiring Duke to reasonably cooperate with BCWF with regard to
bids to MISO under Section 6.2.

29

Duke argues that MISO curtailment orders are Emergency Conditions that prevent
liquidated damages under Section 4.6. On its face, the repeated references to MISO’s obligation
to manage line congestion suggest that it is a routine event, rather than an “emergency.” However,
Article I of the PPA defines “Emergency Condition” as “a condition where [MISO] order[s] a
reduced or curtailed output for reliability purposes in accordance with the Interconnection
Agreement.” [PPA Art. 1 at 4.] Insufficient evidence as well as a question of fact exist as to
whether MISO’s routine curtailments were performed for “reliability purposes in accordance with
the Interconnection Agreement.” [See, e.g., Dkt. No. 63 at 27-28 (BCWF criticizes Duke’s expert
witness’s opinion because it ignores certain facts related to SCED curtailment orders).] In any
event, because there is no basis to conclude that Duke breached the PPA thereby triggering an
obligation to pay liquidated damages, the emergency condition exception is irrelevant to our
analysis.

46

The plain language of the PPA requires Duke to accept and pay for all Electrical
Output as measured at the Point of Metering – which it did [see BCWF’s witnesses, Eisen
Dep. at 82 and Shanker Dep. at 119]. Duke is not obligated under the PPA to pay for
deemed generation or any power generated by BCWF that did not reach the Point of
Metering.
D.

Duke’s Failure To Use Transmission Services.
We repeat: the plain language of the PPA sets forth Duke’s intent “to deliver and

sell all of the Electrical Output to” MISO “at the Point of Metering” and “not . . . to utilize
any Transmission Services.” [PPA § 6.4.] The PPA further provides that if Duke utilizes
Transmission Services “for the Electrical Output” or is required to use Transmission
Services (due to a change in the applicable transmission rules), then Duke is responsible
for arranging and paying for such services. [Id.] It is undisputed that Duke was able to
accept all of BCWF’s Electrical Output at the Point of Metering without the use of
Transmission Services. It is further undisputed that MISO has not required Duke to utilize
Transmission Services to accept Electrical Output.

Consequently, Duke has neither

utilized any Transmission Services nor was it required to do so.
BCWF cites MISO’s change in the “rules” regarding wind power classification
(DIR instead of IR), arguing that because Duke is responsible for arranging Transmission
Services when “required (due to a change in the applicable transmission rules),” Duke was
required to obtain Transmission Services to accept as much power as BCWF could possibly
generate. [Dkt. No. 86 at 26-27.] No evidence has been submitted to show that after MISO
reclassified wind energy as DIR, MISO required Duke to obtain Transmission Services to
47

accept the PPA-defined “Electrical Output.” There simply is no evidence before us of an
“applicable transmission rule” requiring Duke to obtain Transmission Services in order to
accept BCWF’s Electrical Output.
BCWF once again invites us to ignore the defined terms, “Electrical Output” and
“Point of Metering,” in favor of an interpretation that requires Duke to obtain Transmission
Services to accept deemed generation – i.e., power not generated but that is within BCWF’s
capacity to generate. [See Dkt. No. 63 at 20 (“Duke is now unable to accept deliveries of
BCWF’s output due to its bidding policy when LMPs are negative.”).] This interpretation
plainly contradicts the plain and unambiguous language of the PPA. Because both parties
have stipulated that the PPA is unambiguous, our duty (we say again) is to apply the terms
of the contract in light of the parties’ dispute. Accordingly, we hold that the PPA does not
require Duke to obtain Transmission Services in order to accept deemed generation.
Therefore, no breach has occurred by Duke of this provision.
E.

Duke’s $0/MWh Offers to MISO.
BCWF next contends that Duke breached the PPA and the JESOA when it made

allegedly unreasonable $0/MWh offers to MISO. It should be noted that such offers were
not always accepted by MISO, and when such offers were not accepted, they resulted in
MISO curtailments of BCWF’s output. BCWF argues that Duke’s $0/MWh offers to
MISO constituted an impermissible indirect curtailment of BCWF’s output in breach of
the PPA § 6.3 (as it relates to § 6.2) and JESOA § 2.4. It is BCWF’s position that these
“actions [by Duke] to insulate itself from the market price and congestion risks that the
PPA and JESOA allocated to it constitute breaches of these contracts.” [Dkt. No. 63 at
48

22.] Duke responds that its $0/MWh offers to MISO were both permissible and reasonable,
were often accepted by MISO, and, where curtailment determinations were made, MISO
was the entity that made them, not Duke. Both parties seek summary judgment in their
respective favor on this claim.
1.

BCWF’s Decreased Production and Duke’s Reasonable Cooperation
Obligation.

Section 6.3 of the PPA provides:
Environmental Quality Certification Requirements
Seller agrees to use Commercially Reasonable Efforts to conform its
administration of this Agreement to fall within the parameters contained
within the requirements of any Credits or similar benefits for renewable
energy adopted by the State of Indiana in effect on the Effective Date, to
enable qualification of the Electrical Output as renewable energy, as defined
in those requirements.
Notwithstanding anything to the contrary set forth herein, nothing in Section
6.2 or this Section 6.3 shall require Seller to take any action effecting, or
which would otherwise result in, any reduction in the Electrical Output or
cause Seller to incur additional costs as a result of such provisions.
[PPA § 6.3]. Section 6.2 provides:
Scheduling/Market Participant
The parties will reasonably cooperate with each other with respect to the
bidding and scheduling with NIPSCO and/or the RTP of the Electrical
Output to be sold and delivered by Seller and accepted and purchased by
Buyer. Buyer will be responsible for all such bidding and scheduling. The
Parties agree that Buyer shall be the RTO Market Participant for the Plant
(as defined by the RTO Requirements), except in connection with the
delivery of test energy pursuant to Section 9.2 or after the occurrence of an
Event of Default with respect to Buyer.
[Id. § 6.2]. The undisputed material facts do not establish that Duke breached either Section
6.2 or 6.3 of the PPA.
49

Duke contends that because Sections 6.2 and 6.3 of the PPA refer to energy actually
produced (“Electrical Output”), Duke’s obligation to reasonably cooperate with BCWF
with respect to bidding and scheduling refers only to power that has been generated. [See
Dkt. No. 82-1 at 18-19; Dkt. No. 55-1 at 29.] This interpretation of the PPA correctly
applies the parties’ definitions to the defined terms of their unambiguous contract. Because
the parties contend that the PPA is not ambiguous our analysis of this claim may end here.
We acknowledge, however, that the evidence establishes that Duke’s bids did affect
MISO’s decisions to curtail BCWF’s production. If Duke’s bid did not satisfy the threshold
cost for MISO to clear BCWF to operate, then MISO would curtail BCWF’s production.
With its production curtailed, BCWF could not generate power to meet the PPA’s
definition of “Electrical Output” and, as Duke maintains, there would be no power
generated for Duke to bid or sell under Section 6.2 of the PPA. This is another example of
the parties’ strained attempts to conform the facts of their dispute to the PPA, which they
contend is unambiguous.
Even if we were to disregard the parties use of the defined term, “Electrical Output,”
and hold that Sections 6.2 and 6.3 relate to not-yet-generated power, we would reach the
same result, to wit, that Duke did not breach either Section 6.2 or 6.3 of the PPA. As
described below, Section 6.3 imposes no duties on Duke, and, in addition, Duke reasonably
cooperated with BCWF as required by Section 6.2.

50

a.

Section 6.3.

BCWF first asserts that Duke had a duty not to reduce or curtail BCWF’s output
pursuant to PPA § 6.3. [See Dkt. No. 86 at 25 (“. . . Section 6.3 of the PPA, which bars
Duke from taking actions as Market Participant that would require BCWF to reduce its
output, . . . .”); id. (“BCWF contends that the PPA requires Duke to either: (1) do what is
necessary to ensure that BCWF can generate power . . . .”.).] We disagree with this
interpretation of Section 6.3. This provision is wholly unrelated to Duke’s duties to BCWF.
Section 6.3 relates to BCWF’s efforts to qualify its Electrical Output as renewable energy
in order to enjoy the tax credits and other benefits that accompany a renewable-energy
designation. In conjunction with BCWF’s agreement to use commercially-reasonable
efforts to qualify Electrical Output as renewable energy, BCWF is not required to reduce
its Electrical Output or incur additional costs. Because Section 6.3 (on its own) imposes
no obligations or duties on Duke, it cannot provide the basis of a breach of contract claim
against Duke.
b.

Section 6.2.

Section 6.2 requires the parties to reasonably cooperate with each other with respect
to bidding and scheduling of Electrical Output, and, pursuant to Section 6.3, not to require
BCWF to curtail its production. A determination of “reasonableness” is typically a
quintessential question for the finder of fact and not an appropriate issue for determination
on summary judgment.

However, Indiana courts have held that reasonableness

determinations can be questions of law determined by the court when that term is used in
a contract. See Liberty Mut. Ins. Co. v. OSI, Indus., Inc., 831 N.E.2d 192, 203 (Ind. Ct.
51

App. 2005) (“When the facts regarding the notice are undisputed, the issue of
reasonableness is a question of law for the court.”); Koenig v. Bedell, 601 N.E.2d 453, 455
(Ind. Ct. App. 1992) (“[T]he contract contained a standard clause requiring notice of a
claim to be given within a reasonable time as contemplated by the above referenced statute.
When the facts regarding the notice are undisputed, the issue of reasonableness is a
question of law for the court.”); Raymundo v. Hammond Clinic, Ass’n, 449 N.E.2d 276,
280 (Ind. 1983) (“The ultimate determination of whether a noncompetition covenant is
reasonable is a question of law.”).
As provided in Section 6.3, nothing in Section 6.2 “shall require Seller [i.e., BCWF]
to take any action” resulting in “any reduction in the Electrical Output.” BCWF claims
that Duke breached its obligation under Section 6.2 to “reasonably cooperate” with BCWF
when Duke made $0/MWh offers to MISO and those offers resulted in MISO’s requiring
BCWF to reduce its Electrical Output. BCWF does not contend that Duke refused to
communicate with it or that Duke failed to take into consideration BCWF’s perspective
when submitting its bids to MISO. Rather, BCWF maintains that Duke’s bid amounts
themselves constituted a breach when Duke’s bids resulted in a curtailment of the Wind
Farm’s operation. [See Dkt. No. 86 at 29 (“The real question the Court must answer with
respect to Duke’s price offers is whether they breached Duke’s obligations under Section
6.3 of the PPA or Section 2.4 of the JESOA not to curtail BCWF’s output.”).] 30 BCWF

30

This argument echoes BCWF’s position that Duke is required to bid the lowest negative
offer price because it has an obligation to buy all of the possible output of the Wind Farm. [See

52

maintains that to reasonably cooperate under the PPA, Duke was required to make the
lowest allowable bid under MISO’s tariff – negative $500/MWh. The lowest allowable
bid would have reduced the likelihood that MISO would reject Duke’s offer and, in turn,
would have reduced the likelihood that MISO would curtail BCWF’s production.
BCWF’s Vice President, James Eisen, testified that any time Duke submitted any
bid other than the maximum negative offer, Duke failed to reasonably cooperate with
BCWF, contrary to the requirements of the PPA. [Eisen Dep. at 153.] This opinion was
repeated by BCWF’s expert witness, Dr. Shanker. [Shanker Rebuttal Report at 4.] 31
BCWF’s position clearly does not square with the unambiguous PPA. If the only action
Duke could take that would satisfy its obligation to reasonably cooperate with BCWF were
to submit the maximum negative offer, then the PPA would have dispensed with the more
flexible requirement of “reasonable cooperation” and eliminated all of Duke’s (and
BCWF’s) discretion in that regard. To find that “reasonableness” under the PPA requires
Duke to bid only the maximum negative bid, then no cooperation clause would have been
necessary; the parties would have simply included the maximum negative bid as the bid

Shanker Dep. at 210.] Because we have determined that the PPA is not a “take-or-pay” contract
in the sense that Duke is obligated to purchase “deemed generation,” we reject this argument.
31

BCWF explains that even if Duke were to submit negative $500/MWh bids, it would not
necessarily mean that Duke will pay negative $500/MWh for BCWF’s electricity because the
market price is set by the highest bid that cleared the auction. [Dkt. No. 86 at 25, n.19.] This fact
does not contradict or change BCWF’s witnesses’ views that a reasonable bid by Duke is the
maximum negative offer.

53

requirement. We have no authority to read the cooperation provision out of the PPA,
especially when in another context it forms a basis for one of BCWF’s claim. 32
Because BCWF’s proposed “reasonable cooperation” bid price contention is not
reasonable, we look to see whether Duke’s $0/MWh bid was reasonable. A $0/MWh bid
means that Duke pays BCWF the amount due under the PPA and provides the power to
MISO for free. [Dkt. No. 55-1 at 25.] We do not agree with Duke’s characterization that
because it negotiated “the right to bid the energy into the market as the Market Participant”
that “[t]he right to make an appropriate bid lies squarely with Duke per the contract.” [Id.
at 26.] Nor do we concur with BCWF’s characterization that if we “accept Duke’s
argument, Duke would effectively have free license to submit offer prices high enough to
curtail BCWF’s output completely, without incurring any kind of damages obligation.”
[Dkt. No. 63 at 28.] The correct interpretation of the PPA lies between those two extremes.
The PPA expressly requires Duke to reasonably cooperate with BCWF in terms of bids to
MISO – not to bid at any price of its choosing with no consideration for BCWF or to bid
at a level that solely benefits BCWF to the exclusion of Duke. The evidence adduced here

32

BCWF argues that “it would not have made any sense for the parties to have included a
provision regarding specific offer prices at the time the deal was negotiated.” [Dkt. No. 86 at 25.]
This may be true, but the parties did anticipate that bids would need to be made to MISO and
presumably the parties understood that MISO’s tariff would limit those bids. [PPA § 6.2.] It is
not unreasonable to expect the parties to include a provision in the PPA that confined Duke’s bid
amount (whether in terms of dollars or in terms of maximums and minimums), if that is what the
parties intended. Instead, the parties required “reasonable cooperation” with respect to bids. Thus,
we find that the parties did not intend that Duke would submit only the maximum negative bid to
MISO and that any other amount would be deemed unreasonable.

54

supports the conclusion that Duke’s $0/MWh bid falls within the boundaries of reasonable
cooperation. 33
We have previously ruled that the PPA is not a “take-or-pay contract” and that Duke
was not contractually required to utilize Transmission Services. 34 BCWF’s expert, Dr.
Shanker, accordingly testified that he would expect Duke to offer to purchase power from
MISO “at the contract price.” [Dkt. No. 55-1 at 26-27 (citing Shanker Dep. at 209).] The
contract price has increased each year ($51.97/MWh in 2013 to $54.60/MWh in 2015).
[PPA at Ex. A (Purchase Price).] Although Duke’s $0/MWh offer was not the maximum
negative offer, it was of greater value to BCWF than the contract price (meaning Duke is
willing to pay BCWF and sell the power to MISO for free). In that sense, it satisfies the
reasonableness threshold established by BCWF’s own expert witness.
Duke explained that in such situations it typically bids its variable costs, that is, the
price it pays to BCWF pursuant to the PPA. Such a bid represents the most favorable offer
for Duke’s customers, because MISO would defray Duke’s costs to BCWF. Stated
differently, Duke sells the power to MISO for the same price Duke purchases the power
from BCWF. Duke’s typical practice is consonant with BCWF’s expert witness’s opinion.
[See Shanker Dep. at 209.] The undisputed material facts before us demonstrate that Duke

33

In its response, BCWF states that “Duke cannot reasonably contend that Section 6.2 was
meant to give it the ability to curtail BCWF’s output when its losses become unreasonable under
the DIR.” [Dkt. No. 86 at 29.] We do not understand this to be Duke’s argument. We understand
Duke to contend that its $0/MWh offers were reasonable and thus that its bids satisfy Duke’s
obligations under PPA § 6.2.
34

We make no judgment as to whether Duke may be required to utilize Transmission
Services in the future should circumstances change.

55

“balanced its interests under the PPA and those of its customers against the interests of
BCWF and determined to offer well below its typical bidding price.” [See Dkt. No. 82-1
at 17.] Mr. Swez, Duke’s Director of Generation Dispatch and Operations, testified that if
he were attempting to benefit only Duke customers, he would offer $52/MWh (which
would greatly reduce the cost to ratepayers because MISO would defray the cost Duke paid
to BCWF), but Duke in fact offered $0/MWh in an effort to strike a fair balance between
the interests of BCWF and those of Duke’s customers. [Id.at 22 (citing Swez Dep. at 215).]
MISO accepted Duke’s $0/MWh bid more than half of the time it was submitted by
Duke. Indeed, “during the time when Duke submitted its zero dollar offers, MISO cleared
the Wind Farm approximately 59% of the time.” [Dkt. No. 82-1 at 24.] Moreover, on
occasion MISO did not accept Duke’s $0/MWh offer when the LMP was greater than
$0/MWh, evidencing that a low offer did not necessarily guarantee that the price would
clear, permitting BCWF to generate power. We therefore do not regard Duke’s $0/MWh
bid as unreasonable.

Given that Duke neither curtailed BCWF’s output nor made

unreasonable offers to MISO, there is no basis on which to conclude that Duke breached
the PPA § 6.2.
BCWF advances various arguments in its footnotes in an effort to establish that
Duke’s reasonable offer should have been a negative $40/MWh. According to BCWF,
MISO has stated a “presumptively reasonable offer price for the owner of wind generation
resources is negative $40 (the amount of money wind facilities receive in Tax Credits for
every MWh of power they generate).” [Dkt. No. 86 at 30, n.23.] BCWF also maintains
that it is the opinion of Duke’s expert that, if Duke had to pay liquidated damages when its
56

bid curtailed BCWF’s production (although we have found that it did not), “the most
rational offer price for Duke to submit would be negative $40.” [Id.] BCWF further notes
that Mr. Swez “acknowledged that the offer price that would allow the most generation at
the least loss would be the negative value of Production Tax Credits and Renewable Energy
Credits.” [Id.] None of these positions contradicts the undisputed evidence of the
reasonableness of Duke’s $0/MWh offers. BCWF’s cited evidence actually shows a
“presumptive” reasonable offer as per MISO’s opinion, a “rational offer,” and an offer
price that would allow for the highest amounts of energy generation with the lowest level
of loss. None of these opinions directly refutes Duke’s evidence that its $0/MWh offers
comported with its obligation to provide reasonable cooperation with BCWF. 35
2.

Duke’s Reliance on MISO To Curtail BCWF Production.

We find no basis on which to conclude that Duke’s bids to MISO were an
impermissible means of accomplishing what Duke is prohibited from doing under the PPA,
i.e., to force BCWF to decrease its production. In making this argument, BCWF ignores a
critical player in the curtailment relationship between Duke and BCWF: MISO. The
undisputed material facts demonstrate that it is MISO who was the “traffic cop” charged

35

Duke provided additional evidence to illustrate that the opinions advanced by BCWF are
not consistent with the arguments made by BCWF. For example, MISO’s Mr. Herbst did not
testify that the most rational offer price for Duke to submit would be negative $40. Instead, he
characterized negative $40 as a “presumed break even point,” saying nothing about a reasonable
price offer. [Dkt. No. 92-1 at 16-17.] In addition, Duke’s expert witness’s testimony regarding a
“rational offer” was based on a “hypothetical contract” proposed by BCWF’s attorney the specific
provisions of which Duke’s witness stated he would need to review before offering an opinion.
[Id. at 17.] Duke also explains that Mr. Swez’s opinion was based on a government subsidy to
offset negative LMPs, which is not applicable here, since BCWF rather than Duke owns the tax
credits. [Id at 17-18.]

57

with ensuring power deliveries, managing the market, and clearing the price. When
necessary, MISO curtailed BCWF’s Electrical Output under both the IR rules and the DIR
rules, even when Duke’s bid was more beneficial than MISO’s clearing price. When
BCWF generated its minimum amount of power during a time when MISO was setting
negative LMPs, Duke paid MISO the negative LMP despite Duke’s $0/MWh offer. In
fact, Duke paid a total of $666,324.93 in negative LMPs despite the DIR process.
Although BCWF contends that Duke has engaged in impermissible curtailments of
BCWF’s production by offering unreasonable bids of $0/MWh to MISO, the undisputed
material facts establish that it was MISO’s ultimate decision whether to accept Duke’s
offer, whether to force Duke to accept power despite the amount of its offer when negative
LMPs exist, and whether to curtail BCWF’s generation of power. BCWF’s expert agrees
that it is difficult for Duke to anticipate when MISO will or will not dispatch, given that
MISO’s calculations are proprietary and complex. [Dkt. No. 82-1 at 23 (citing Neal Dep.
172-73).] 36 Clearly, this process is not as linear and straightforward and transparent as
BCWF suggests, especially since it is MISO’s SCED system that auto curtails output
whenever the LMP falls below Duke’s offer. [See Dkt. No. 63 at 19.]

36

It is unclear how precise Duke’s attempts would have to be in anticipating the dollar
amount of a particular bid at which MISO would clear BCWF to operate. [See Dkt. No. 86 at 25,
n. 20 (“Duke may not always know with certainty whether a particular offer price would be
accepted, Duke would know the relative likelihood of the offer’s acceptance.”) (emphasis added).]
Despite the lack of precision in this regard, both parties agree that Duke could not predict with
absolute certainty whether MISO would accept its price offers.

58

3.

Risk Allocation Shift.

BCWF further contends that Duke’s $0/MWh offers to MISO reflect Duke’s
improper attempts to shift the market risk allocation that had been agreed to in the fixedprice PPA. We disagree with this contention. Although the PPA constitutes a long-term
fixed price contract between BCWF and Duke, the parties anticipated that Duke would
advance bids in the market to sell the energy it purchased from BCWF. [See PPA § 6.2.]
Duke’s $0/MWh bids are thus not impermissible in shifting the market risk between the
parties under the terms of the PPA.
BCWF likens our case to Northern Indiana Public Service Co. v. Carbon County
Coal Co., 799 F.2d 265 (7th Cir. 1986). There the court considered the doctrine of
impossibility as a basis on which one party could walk away from a contract, holding as
follows:
Since “the very purpose of a fixed price agreement is to place the risk of
increased costs on the promisor (and the risk of decreased costs on the
promisee),” the fact that costs decrease steeply (which is in effect what
happened here – the cost of generating electricity turned out to be lower than
NIPSCO thought when it signed the fixed-price contract with Carbon
County) cannot allow the buyer to walk away from the contract.
Id. at 278 (citations omitted). In Northern Indiana Public Services, supra, the utility sought
to be relieved of its obligations under a long-term, fixed-price contract. That contract
required the utility to accept a specific amount of coal over twenty years. Because over
time the utility was able to purchase coal less expensively from another provider, it stopped
accepting deliveries from Carbon County, for which refusal it sought the court’s approval.
Id. at 267. Here, Duke does not seek relief from the PPA. Duke has not claimed that its

59

purchase obligations to BCWF under the PPA are impossible or unreasonable. Duke has
not refused delivery of electricity from BCWF (although at times MISO has ordered BCWF
to stop production). Northern Indiana Public Service Company is therefore inapposite.
4.

Duke’s Alleged Hindrance of BCWF’s Performance.

BCWF claims that by submitting $0/MWh offers thereby causing MISO to curtail
its output, Duke violated an implied condition of the PPA to refrain from hindering
BCWF’s performance under the contract. [Dkt. No. 86 at 30-32.] This claim falls short
for the same reasons we have concluded that Duke did not breach the express “reasonable
cooperation” requirement of the PPA set out in § 6.2 and that Duke is not liable for
liquidated damages. The PPA does not impose any obligation on Duke to do everything
possible to ensure that BCWF can generate its maximum amount of power. [See supra.]
Duke’s $0/MWh offers thus were neither unreasonable nor did they hinder BCWF’s
performance.
An implied duty not to prevent or hinder performance of a contract “obviously
cannot have been contemplated by the parties.” 23 Williston on Contracts § 63:26 (4th
ed.).

Here, BCWF maintains that Duke’s $0/MWh offers to MISO hindered its

performance of the contract in that those offers caused the curtailment of the Wind Farm’s
production. Clearly, the parties contemplated in their agreement that Duke would make
offers to MISO, and, in fact, delegated to Duke the power to offer bids, and imposed on
Duke a requirement that it reasonably cooperate with both BCWF and MISO. [See PPA
§ 6.2.] No minimum or maximum bid amount or any other specific amount was imposed

60

on Duke under the PPA. Duke did not have the right itself to curtail BCWF’s production,
according to the PPA.
The “implied duty not to hinder performance” sometimes provides an excuse for
non-performance, but it does not constitute a stand-alone claim. [See Dkt. No. 55-1 at 32
(citing Maddox v. Wright, 489 N.E.2d 133, 137 (Ind. Ct. App. 1986) (“It is well established
that where the actions or conduct of one party to a contract prevent the other from
performing his part, the other’s non-performance will be excused.”); Manzon v. Stant
Corp., 202 F. Supp. 2d 851, 862-63 (S.D. Ind. 2002); Rogier v. Am. Testing & Eng’g Corp.,
734 N.E.2d 606, 621 (Ind. Ct. App. 2000).] If Duke were asserting a claim for breach of
contract by BCWF for failing to generate electricity after Duke failed to bid or failed to
obtain the necessary Transmission Services, this implied duty might apply to excuse
BCWF’s non-performance. But here, BCWF seeks to impose liability on Duke rather than
to excuse BCWF’s own non-performance. Reliance on an implied duty is unavailable to
BCWF given the facts of the case before us.
BCWF contends that Duke’s $0/MWh offers amounted to a form of “contractual
sabotage” by Duke that prevented BCWF’s performance which, in turn, allowed Duke to
avoid its obligation to pay BCWF for electricity. 37 Unfortunately for BCWF this argument
does not hold water, given the plain language of the PPA as well as Indiana law. “A

37

BCWF describes this situation as being “no different than if Duke hired someone with
wire cutters to cut the transmission line connecting BCWF’s wind farm to the Point of Metering.”
[Dkt. No. 86 at 31.] Colorful though this analogy is, we disagree with its thrust. If Duke had
actually cut the transmission lines, a tort action would likely arise. Here, Duke’s conduct is
governed by the parties’ contract.

61

condition precedent is either a condition which must be satisfied before an agreement
becomes enforceable or a condition which must be fulfilled before the duty to perform an
already existing contract arises.” Hamlin v. Steward, 622 N.E.2d 535, 539 (Ind. Ct. App.
1993); see also Sand Creek Country Club, Ltd. v. CSO Architects, Inc., 582 N.E.2d 872,
875 (Ind. Ct. App. 1991) (“Conditions precedent are disfavored and must be explicitly
stated.”). Here, no condition precedent to performance existed. The parties’ duties are set
out in the contract: BCWF was obligated to generate electricity and Duke was obligated
to pay for the Electrical Output as measured at the Point of Metering. The agreement and
the parties’ duties to perform it are fully enforceable.
Duke contends, and we agree, that the doctrine of failure of a condition precedent
excuses a breach. However, BCWF seeks to apply this doctrine to establish a breach, rather
than excuse a breach. We repeat what we have said previously: Duke is not obligated
under the PPA to purchase all the energy that BCWF could possibly generate, and there is
no evidence to establish that Duke hindered BCWF’s ability to generate electricity.
Because MISO was empowered to make all curtailment determinations, requiring Duke to
accept power even when the LMPs were below Duke’s bid, MISO was authorized to curtail
BCWF’s production when the LMP was greater than Duke’s bid. The undisputed material
facts demonstrate that Duke did not impermissibly hinder BCWF’s production of power
or prevent BCWF from performing its responsibilities under the PPA by offering to sell

62

BCWF’s power to MISO for no less than $0/MWh. 38 Duke did not breach its obligations
to reasonably cooperate with BCWF.
5.

Duke’s $0/MWh Offers and JESOA’s Requirements.

BCWF’s attempts to show that Duke breached the JESOA by making $0/MWh
offers are equally unavailing. Section 2.4 of the JESOA provides, in part:
Notwithstanding anything in this Agreement to the contrary, Seller shall have
the right to curtail the Total Facility Output as required under the
Interconnection Agreement or as instructed by the RTO or NIPSCO and to
comply with all RTO and NIPSCO operating procedures in effect from time
to time, and Duke and Vectren agree to cooperate with Seller in connection
therewith and to comply (to the extent compliance is required by either of
them) with all RTO and NIPSCO curtailment orders and operating
procedures and with all RTO Requirements in effect from time to time.
Except to the extent expressly provided in the respective PPAs, neither Duke
nor Vectren shall have the right to curtail or reduce the Total Facility Output.
[JESOA § 2.4 at 7 (emphasis added).] 39 This section 2.4 of the JESOA does not provide a
basis on which to find that by offering $0/MWh to MISO Duke breached the agreement.
This section provides that BCWF “shall have the right to curtail the Total Facility Output”

38

It is for this reason that BCWF’s case citations on page 31 of its opposition brief are
inapplicable here. Because Duke has no obligation to bid so that BCWF is operating at maximum
capacity, Duke has not hindered BCWF’s performance. [See contra Dkt. No. 86 at 31 (collecting
cases related to breach of contract for one party to hinder, prevent, delay, or make more expensive
the other party’s performance).]
39

The JESOA’s definition of the terms related to the electrical output are similar to those
in the PPA. The JESOA defines “Electrical Output” as “the electric energy output of the Facility
delivered to the Delivery Point.” [JESOA at 3.] “Delivery Point” is defined in the agreement as
“the interconnection point of the Facility to the RTO-controlled transmission grid.” [Id. at 2.]
“Total Facility Output” as used in the JESOA means “the total electrical energy produced by the
Facility Capacity from time to time, net of energy used by the Facility, as measured at the Delivery
Point.” [Id. at 5.]

63

and that Duke does not have the right to curtail or reduce the Total Facility Output. Section
2.4 also requires both Duke and BCWF to “comply with all [MISO] operating procedures.”
Although Section 2.4 expressly denies Duke the right to “curtail or reduce the Total
Facility Output,” as discussed supra, it is as we have said now many times, not Duke that
curtails or reduces BCWF’s output, but MISO.

BCWF points to Duke’s internal

discussions in which Duke expressed its desire to curtail BCWF’s production when LMPs
were negative, proffering it as evidence of Duke’s breach of contract. [See Dkt. No. 63 at
19-20 (pointing to Duke’s internal emails indicating a desire for MISO to curtail BCWF
production because the contract prohibits Duke from doing the same).] Whatever Duke’s
subjective desires were in terms of wanting MISO to curtail BCWF’s production when the
LMPs are negative, they do not establish a breach of contract by Duke. We have found
Duke’s $0/MWh offers to be reasonable as a matter of law. Accordingly, Duke cannot be
deemed to have breached the JESOA § 2.4 by offering $0/MWh to MISO when MISO,
thereafter curtailed or reduced the Electrical Output of the Wind Farm. 40

40

Because we do not find that Duke breached the contracts by making $0/MWh offers, we
need not reach the issue of causation. BCWF suggests that Duke admits that the $0/MWh offers
resulted in curtailment and, as a result, we should engage in a causation analysis to conclude that
Duke found a way for MISO to do what it could not. [See Dkt. No. 86 at 24 (arguing that it is
Duke’s $0/MWh offers that cause a curtailment and thus Duke should not be rewarded for finding
a way for MISO to curtail on its behalf).] Yet, both of the cases cited by BCWF illustrate that the
“test of causation” only occurs after a breach is established. See Fowler v. Campbell, 612 N.E.2d
596, 602 (Ind. Ct. App. 1993); WESCO Distrib., Inc. v. Arcelor Mittal Ind. Harbor LLC, 23 N.E.3d
682, 708 (Ind. Ct. App. 2014). Since no breach exists here, we have sidestepped the question of
causation.

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F.

Duke Did Not Breach Its Duty of Good Faith.
BCWF has also argued that Duke had both an express duty of good faith, pursuant

to Section 12.2(c) of the PPA, as well as an implied obligation of good faith under Indiana
law. The PPA provides that it is “subject to the application of (i) general principles of
equity (regardless of whether considered in a proceeding in equity or at law), including,
without limitation, the possible unavailability of specific performance, injunctive relief or
any other equitable remedy and (ii) concepts of materiality, reasonableness, good faith and
fair dealing.” [PPA § 12.2(c).] BCWF contends that Duke violated § 12.2(c) of the PPA
by failing to submit competitive market bids or pay liquidated damages. Indiana courts
recognize a duty of good faith and fair dealing in instances where (as here) the duty is
expressly provided for in the contract. Coates v. Heat Wagons, Inc., 942 N.E.2d 905, 918
(Ind. Ct. App. 2011) (citing Allison v. Union Hosp., Inc., 883 N.E.2d 113, 123 (Ind. Ct.
App. 2008)). 41 Having found Duke not liable for liquidated damages and having ruled that
it made reasonable offers to MISO as it was required to do under the PPA, no grounds exist
for finding that Duke’s conduct violated PPA § 12.2(c) or any implied duty under Indiana
law.
Duke faults BCWF’s Count III Breach of Duty of Good Faith and Fair Dealing as
duplicative of or subsumed by BCWF’s breach of contract claim. [Dkt. 55-1 at 33 (citing

41

BCWF cites Market St. Assocs. Ltd. P’ship v. Frey, 941 F.2d 588, 595 (7th Cir. 1991),
the Seventh Circuit’s holding that the “doctrine of good faith is to forbid the kinds of opportunistic
behavior that a mutually dependent, cooperative relationship might enable in the absence of rule.”
However, because Market Street Associates is based on Wisconsin law, not Indiana law, it provides
no useful precedent.

65

Baxter Healthcare Corp. v. O.R. Concepts, Inc., 69 F.3d 785, 792 (7th Cir. 1995) (finding
that the duty of good faith and fair dealing is an interpretive rule and “not an independent
source of duties for the parties to a contract”); Troutt v. City of Lawrence, No. 1:06-CV1189-DFH-TAB, 2008 WL 3287518, at *17 (S.D. Ind. Aug. 8, 2008) (treating claim for
breach of contractual duty of good faith as a breach of contract claim); Amaya v. Brater,
981 N.E.2d 1235, 1239 (Ind. Ct. App. 2013).] In the absence of a finding that Duke
breached the PPA or JESOA, Duke is not liable for a breach of its duty of good faith and
fair dealing, even as a separate claim. See Amaya, 981 N.E.2d at 1242; Baxter, 69 F.3d at
791–92.
A question of fact as to Duke’s state of mind exists according to BCWF that
forecloses summary judgment on BCWF’s claim of breach of good faith and fair dealing.
[See Dkt. No. 86 at 33 (BCWF arguing that Duke cannot be granted summary judgment
because a state-of-mind inquiry cannot be concluded on summary judgment).] Duke’s
alleged state of mind, however, is irrelevant since Duke did not breach the contract. In like
fashion, Duke did not breach a duty of good faith and fair dealing towards BCWF.
G.

BCWF Declaratory Judgement Claim – Count IV.
Summary judgment is available under Federal Rule 56 on claims for declaratory

relief. BCWF seeks such declaratory relief here under the federal declaratory judgment
statute, 28 U.S.C. § 2201. Rule 57 provides that “[the Federal Rules of Civil Procedure]
govern the procedure for obtaining a declaratory judgment under 28 U.S.C. §2201.” See
Medical Assurance Co., Inc. v. Hellman, 610 F.3d 371, 381 (7th Cir. 2010) (“[S]ummary
judgment is a good tool to examine not only whether Medical Assurance can succeed as a
66

matter of law, but also whether this case is a suitable candidate for declaratory relief.”);
State Farm & Cas. Co. v. Sanders, 805 F. Supp. 1453 (S.D. Ind. 1992) (granting summary
judgment on claim for declaratory judgment); Am. Family Mut. Ins. Co. v. Lane, 782 F.
Supp. 415, 420 (S.D. Ind. 1991) (“[T]he Court concludes that the declaratory judgment
plaintiff’s Motion for Summary Judgment should be GRANTED.”).
The declaration BCWF seeks, however, that Duke’s conduct violated the PPA and
JESOA, is not available as a matter of law. Based on our prior rulings that Duke was not
required to make maximum negative bids or to pay liquidated damages for deemed
generation, Count IV fails as a matter of law to state a claim upon which relief can be
granted. Duke is thus entitled to summary judgment on BCWF’s Count IV for declaratory
judgment.
H.

Duke’s Affirmative Defenses.
Finally, BCWF has moved for summary judgment on Duke’s affirmative defenses:

unjust enrichment, equity and reasonableness, and mitigation of damages. Each of Duke’s
affirmative defenses is predicated on its obligation to pay for deemed generation – that
BCWF would be unjustly enriched if Duke were to pay for power not generated; that
Section 12.2(c) of the PPA prevents BCWF from imposing huge losses upon Duke and its
ratepayers; and that BCWF failed to mitigate its damages suffered by curtailment orders.
Having ruled in favor of Duke on the breach of contract claims, we have addressed Duke’s
affirmative defenses.

67

Conclusion
For the foregoing reasons, we DENY BCWF’s Motion for Summary Judgment and
GRANT Duke’s Motion for Summary Judgment. Final judgment shall enter accordingly.

7/6/2015

_______________________________

Date: _____________

SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana

Distribution:
Clay J. Pierce
DRINKER BIDDLE & REATH, LLP
[e-mail]
Laurie E. Martin
HOOVER HULL TURNER LLP
[e-mail]
Andrew W. Hull
HOOVER HULL TURNER LLP
[e-mail]
John D. Papageorge
TAFT STETTINIUS & HOLLISTER LLP
[e-mail]
Michele Lee Richey
TAFT STETTINIUS & HOLLISTER LLP
[e-mail]

68