UI faces lawsuit for alleged breach of public/private utility contract

The lawsuit alleges that the University of Iowa breached its contract with the UI Energy Collaborative, resulting in millions of unpaid fees and repairs.


Ayrton Breckenridge

The University of Iowa Power Plant as seen on Tuesday, Oct. 19, 2021.

Grace Katzer, News Reporter

Three years after entering a 50-year-long deal, the University of Iowa Energy Collaborative, which oversees the utilities across campus, filed a federal lawsuit against the UI for a breach of contract.

The lawsuit claims the UI refused to make payments and rescinded approvals for repairs to the utility systems. The lawsuit also alleges the UI failed to file claims for casualty insurance coverage for damages and the rising cost of turbine repairs, according to a complaint in the lawsuit.

The UI public-private partnership was established four years after the state Board of Regents approved the contract with the UI Energy Collaborative in exchange for $1.2 billion upfront. The deal required the UI to pay $35 million annually to the UI Energy Collaborative, with the annual amount increasing after the first five years of payments.

The UI Energy Collaborative is a product of the public-private partnership between ENGIE North America Inc. of Texas and Meridiam Infrastructure North America Corp. of New York.

The company manages two power plants, a water treatment plant, a chilled water plant, and a distribution system for the UI, according to the UI Energy Collaborative.

Fees included in the lawsuit include $1.5 million compensation packages for the company’s CEO and CFO, administrative costs, costs of maintaining investment-grade credit, and $2.5 million from the UIEC for the overhauling of a previously-committed utility system turbine, alleging bad repair due to inadequate maintenance.

UI public relations specialist Steve Schmadeke wrote in an email to The Daily Iowan that the UI’s public/private partners disagree regarding some of the terms and conditions of the 50-year utility agreement.

“The university has been working with its utilities partner to resolve these differences,” Schmadeke wrote. “We are disappointed that our utilities partner has a different interpretation of the contract and felt the need to file a lawsuit against the university.  We are eager for the court to provide us with a clear definition of the contract for both parties to adhere to.”

The lawsuit also seeks relief from the university’s threatened litigation after two power outages in 2021. The UI Energy Collaborative claims the power outages were planned for months; however, the university sought $5 million in compensation, according to the lawsuit.

State Auditor Rob Sand cautioned government officials in December of future public-private partnership agreements following an investigation of the ongoing UI deal. Sand wrote in the audit that the transaction has become one of the largest financial obligations held by Iowa taxpayers.

The company claimed that despite bearing the costs of damages, the UI Energy Collaborative was not responsible for the damages and casualty events in the lawsuit.