Solutia and the Calpine entities—Calpine Central and Decatur Energy Center—contracted to build a cogeneration plant, from which Solutia would purchase steam and power and the Calpine entities would sell power to the wholesale market. This case concerns the damages incurred by Decatur Energy Center and Calpine Central as a result of Solutia’s rejection of contracts in bankruptcy.

NERA prepared an expert report on the damages due to each claimant and provided deposition testimony and testimony at an arbitration hearing in the case.

NERA formulated the theory of damages and applied it to estimate the damages due to Calpine, as well as the mitigation that Calpine received from the return of capacity that has a market value. NERA’s report addressed the appropriate forecasts of power and natural gas to be used; modeled the economic operation of the cogeneration facility given market conditions, contract obligations, and the engineering aspects of the plant; calculated the implications of alter ego issues to the estimates of damages; and calculated the implications of market practices and power procurement practices for the value of Qualifying Facility status.

Our advice identified the difference between consequential damages, which are barred by contract, and direct damages.