CPS Energy has reportedly dropped Toshiba from a $32 billion lawsuit stemming from now-defunct plans for the expansion of the South Texas Project (STP) nuclear plant in Matagorda County, Texas. The move was allegedly made to keep the case from being shifted to federal court.

The utility owned by the city of San Antonio is still suing NRG Energy and Nuclear Innovation North America (NINA), reported the San Antonio Express News on Monday. The newspaper said that the project’s contractor, Toshiba—a Japanese company—had cited a 1958 international convention and two agreements with CPS Energy to force the move from state court in San Antonio to federal court on Friday. CPS Energy allegedly agreed to remove Toshiba from the case rather than shift to federal court.

NRG spokesman David Knox reportedly told the newspaper that CPS Energy’s legal claims had no merit. “The fact that CPS Energy has dismissed Toshiba in order to avoid a review by federal court demonstrated that CPS Energy is fully aware of the weakness of its legal arguments,” the newspaper quoted him as saying

 The development follows a statement by CPS Energy last week in which it claimed that efforts to see an out-of-court resolution in the dispute had not been fruitful, even though San Antonio Mayor Julian Castro had called on officials of all entities to negotiate a business solution.

“CPS Energy is ready to honor Mayor Castro’s request and seek a sensible solution out of court,” said CPS Energy Acting General Manager Jelynne LeBlanc-Burley, “however it appears David Crane of NRG Energy and Steve Winn of NINA aren’t interested or else they would have attended today’s meeting. Instead, they’ve sent their lawyers who thus far have been very uncooperative. Ignoring Mayor Castro’s invitation indicates Mr. Crane and Mr. Winn are not at all serious about a negotiated settlement.”

The dispute between CPS Energy and its 50-50 partner in the STP expansion, NINA, began last fall, when Toshiba gave CPS Energy a substantially higher preliminary cost estimate to build Units 3 and 4 at the STP plant—reportedly $4 billion more than CPS Energy’s preliminary total project cost of $13 billion.

In early December 2009, the utility filed a petition with a Bexar County court to define the liability both parties faced if they pulled out of the project near Bay City, Texas. CPS Energy said in its filing it had invested nearly $300 million in the project’s engineering and planning—even though a permit to build and operate the reactors won’t be granted until 2012. The “value of participation and related rights in and improvement to the project site” are worth more than $2 billion, CPS said.

The lawsuit escalated just before Christmas Day when NRG Energy sued CPS Energy, claiming the utility should forfeit its $300 million investment thus far and lose all value in the project. CPS then amended its filing, claiming NRG, NINA, and Toshiba failed to disclose critical cost information and disparaged CPS to hurt the utility’s ability to sell part of its stake in the nuclear project.  

Earlier this month, San Antonio’s CPS Energy said it had received the contractually mandated cost estimate for the proposed project from Toshiba—but it stressed it would make no decisions on the project until “rigorous analysis” of price and methodology was completed.

“We have honored and will continue to honor our contractual obligations to fund the Project,” LeBlanc-Burley said. “We will vigorously seek to protect our ownership value in STP including existing water, land and other valuable assets for the benefit of our customers and community.”   

NRG Energy’s claim that CPS Energy should forfeit its investment in STP Units 3 and 4 is based upon the wording of a draft agreement that the utility rejected and never signed, she added. “It is amazing that NRG Energy would seek such drastic and draconian relief based on a contract that was actually rejected by CPS Energy and never executed.”

In regards to NRG Energy’s allegations that CPS Energy has jeopardized federal loan guarantees, LeBlanc-Burley said, “That is totally false.”

 “Intent on keeping all our energy options open, we continue to cooperate with and update the U. S. Department of Energy on our application for federal loan guarantees to help in the financing of STP Units 3 and 4.”

Sources: CPS Energy, Houston Chronicle, San Antonio Express, POWERnews