City still scrambling to resolve $126 million dispute with GE

VICTORVILLE • It’s been nearly four months since the city quietly selected a New Jersey company as the leading contender to buy development rights for the planned $1.2 billion Victorville 2 power plant.

The deal was meant to help stabilize the city’s precarious financial position, with a $126 million payment to General Electric for the power plant’s equipment roughly 15 months past due.

While city staff officially said NRG Energy Inc. is “still at the table,” knowledgeable sources have confirmed that the company has essentially backed down from the deal, asking the city to void the Memorandum of Understanding that Victorville signed with them during a closed session in October.

The MOU fell apart, sources said, primarily because the company was unsuccessful in resolving the city’s situation with GE.

The city paid GE $50 million in 2007 for a down payment on turbines for the plant, with officials predicting then that construction would be complete in 2010.

GE has granted Victorville extensions 30 days at a time since the $126 million balance was due in November 2008. Deputy City Manager Doug Robertson said they recently received another month to work toward resolving the dispute.

To get the city out of this bind, staff has been scrambling since last year to find someone who’ll take over development of VV2 — though there are a number of restrictive contracts encumbering the deal and no Power Purchase Agreement yet in place.

Staff sent a bid package to a limited number of potential buyers last May, indicating they were looking for offers in the neighborhood of $230 million to cover the city’s obligations to GE and to recover consulting fees, land and preliminary engineering.

Victorville received four proposals in response, and the council (again in closed session, with no action reported) decided on a split vote to sign an exclusive agreement with NRG.

Staff said City Attorney Andre deBortnowsky denied releasing that agreement or allowing them to answer questions about details included in it, citing attorney-client privilege and referencing a law that states the public good is best served by keeping it private.

Though a spokesman for NRG confirmed last fall that the company was working with Victorville on the project, he did not respond to repeated requests for comment on the current situation.

The agreement with NRG expires April 7, according to Robertson. When asked what Victorville will do if no deal is reached by then, he simply said staff “will evaluate options at that time.”

Brooke Edwards may be reached at (760) 955-5358 or at