Federal judge dismisses lawsuit against East River Electric

On April 11, Federal Judge Lawrence Piersol dismissed a lawsuit filed by Dakota Energy Cooperative against its wholesale power supplier East River Electric Power Cooperative, a Basin Electric Class A member headquartered in Madison, South Dakota, saying that the wholesale power contract between the two electric cooperatives is clear and does not allow Dakota Energy to terminate its contract early. Basin Electric intervened in the lawsuit to support East River Electric. Dakota Energy filed to appeal the case to the 8th Circuit Court of Appeals on April 27.

“The ruling from Judge Piersol is a major victory for all of the electric cooperative member-owners across the state of South Dakota,” said East River Electric General Manager and CEO Tom Boyko. “A contract is a contract and Judge Piersol’s ruling is clear that the contract does not allow for an early termination. It affirms what we’ve been saying all along, Dakota Energy can’t just walk away from the commitment it made to its neighboring cooperatives. Unfortunately, they will now be spending even more member-owner money on an appeal.”

In November 2020, Dakota Energy, an electric distribution co-op headquartered in Huron, South Dakota, filed a lawsuit against East River Electric in an attempt to force East River to give Dakota Energy a buyout number so Dakota Energy could terminate its contract which expires on Dec. 31, 2075. East River Electric and Basin Electric argued in court that the contract signed by Dakota Energy in 2015 does not provide for an early buyout. Judge Piersol agreed with East River Electric and Basin Electric and granted their motions for summary judgment, dismissing the case.

Dakota Energy had earlier signed a letter of intent with a for-profit energy broker, Guzman Energy, based in Denver, Colorado, to receive wholesale power if their case was successful.

A nearly identical case in South Carolina, Marlboro vs. Central Electric, was decided just days prior to the South Dakota case. Marlboro Electric, a distribution cooperative, filed a lawsuit against its G&T (generation & transmission) cooperative, Central Electric. Just as in the Dakota Energy case, Central Electric’s motion for summary judgment was granted with the court finding there was no right to terminate the wholesale power contract early.  

Mark Foss, Basin Electric general counsel and senior vice president, said, “While this was a very big win for East River and Basin Electric, I think these two cases are big wins for G&T cooperatives around the country. I think it’s a settled legal matter at this point in time.

“If you put these lawsuits together, they’re reading the same bylaw and wholesale power contract provisions, and both courts are saying a contract is a contract and you’re bound by it until the date of expiration,” he said. “There is no magic right for you to get out of it because there is some vulture out there that wants to provide your power.”

Boyko said the ruling ensures that Dakota Energy member-owners will continue to have access to reliable and affordable power from East River Electric, their South Dakota-based wholesale electric cooperative, for years to come and they won’t be forced into buying power from a for-profit company. “Not-for-profit electric cooperatives have always worked together to provide affordable power to their members and this ruling ensures that a for-profit company like Guzman Energy can’t come into South Dakota and profit off of co-op consumers,” he said.

This year marks the fourth year in a row that East River’s rates have been flat or have gone down. East River also returned more than $17 million in capital credits and bill credits to its members between May 2021 and February 2022. About $840,000 of that amount went directly to Dakota Energy.