United States Court of Appeals 

for the Federal Circuit 

__________________________ 

KANSAS GAS AND ELECTRIC COMPANY, 

KANSAS CITY POWER & LIGHT COMPANY, 

AND KANSAS ELECTRIC POWER COOPERATIVE, 

INC., 

Plaintiffs-Appellants, 

V. 

UNITED STATES, 

Defendant-Cross Appellant. 

__________________________ 

2011-5044, -5045 

__________________________ 

Appeals from the United States Court of Federal 

Claims in Case No. 04-CV-099, Judge Christine O. C. 

Miller. 

_________________________ 

Decided: July 12, 2012 

_________________________ 

ROBERT L. SHAPIRO, Hughes Hubbard & Reed LLP, of 

Washington, DC, argued for plaintiffs-appellants. With 

him on the brief was DANIEL T. LLOYD. 

CHRISTOPHER J. CARNEY, Trial Attorney, Commercial 

Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendantcross appellant. With him on the brief were TONY WEST, 
KANSAS GAS & ELECTRIC CO v. US 2

Assistant Attorney General, JEANNE E. DAVIDSON, Director, HAROLD D. LESTER, JR., Assistant Director, JAMES P.

CONNOR, JEREMIAH M. LUONGO, and LUKE A.E. PAZICKY, 

Trial Attorneys. Of counsel were ANDREW V. AVERBACH 

and ALAN J. LO RE. Of counsel on the brief was JANE K.

TAYLOR, Office of General Counsel, United States Department of Energy, of Washington, DC. 

__________________________ 

Before RADER, Chief Judge, BRYSON and LINN, Circuit 

Judges. 

Opinion for the court filed by Chief Judge RADER. 

 Opinion dissenting-in-part filed by Circuit Judge LINN. 

RADER, Chief Judge. 

Kansas Gas and Electric Company (“KG&E”), Kansas 

City Power & Light Company (“KCPL”), and Kansas 

Electric Power Cooperative, Inc. (“KEPCO”) (collectively 

“the Kansas Companies”) suffered damages due to the 

Government’s partial breach of the Standard Contract for 

Disposal of Spent Nuclear Fuel And/Or High-Level Radioactive Waste (“Standard Contract”). In June 2010, the 

United States Court of Federal Claims conducted a nineday trial and awarded the Kansas Companies 

$10,632,454.83. 

In determining the amount of damages, the trial court 

correctly did not award damages for cost of capital and for 

the costs associated with researching alternative storage 

options for spent nuclear fuel (“SNF”) and high level 

radioactive waste (“HLW”). The trial court also appropriately reduced the Kansas Companies’ damages by the 

value of the benefit they received as a result of their 

mitigation activities. However, the trial court erred by 

not accepting the Kansas Companies’ reasonable method 

for calculating overhead costs. Therefore, this court 
3 KANSAS GAS & ELECTRIC CO v. US

affirms-in-part and reverses-in-part the trial court’s 

damages award. 

I. 

In 1983, Congress enacted the Nuclear Waste Policy 

Act of 1982 (“NWPA”). Pub. L. No. 97-425, 96 Stat. 2201 

(codified at 42 U.S.C. §§ 10101–10270 (2006)). The 

NWPA authorized the Department of Energy (“DOE”) to 

enter into contracts for the collection and disposal of SNF 

and HWL. 42 U.S.C. § 10222(a)(1). The Standard Contract required the owners of SNF and HLW to pay fees 

into the Nuclear Waste Fund, in exchange for which the 

DOE would begin to dispose of the SNF and HLW “not 

later than January 31, 1998.” 42 U.S.C. § 10222(a)(5)(B); 

10 C.F.R. § 961.11 (2011). 

On October 10, 1984, the Kansas Companies entered 

into the Standard Contract with DOE. Kan. Gas & Elec. 

Co. v. United States, 95 Fed. Cl. 257, 260 (2010) (“KG & 

E”). The Kansas Companies collectively own Wolf Creek 

Nuclear Operating Corp., which operates the Wolf Creek 

Generating Station (“Wolf Creek”), a nuclear power plant 

located near Burlington, Kansas. Id. at 262. Wolf Creek’s 

nuclear reactor initially operated with 193 fuel assemblies. Id. When fuel assemblies no longer efficiently 

generate energy, the plant is refueled. The refueling 

process removes the spent fuel assemblies from the reactor core and places them into storage cells in racks located 

in Wolf Creek’s spent fuel pool. The parties refer to this 

storage option as “wet storage.” Id. 

While Government performance should have begun in 

1998, not all utilities would have expected recovery of 

their spent fuel at this time. See Yankee Atomic Elec. Co. 

v. United States, 536 F.3d 1268, 1272–73 (Fed. Cir. 2008) 

(explaining the role of the Standard Contract acceptance 

rate). In this case, the record shows that the Govern-
KANSAS GAS & ELECTRIC CO v. US 4

ment’s first scheduled collection of Wolf Creek’s SNF 

would have been in 2006. KG & E, 95 Fed. Cl. at 260. 

As early as 1993, the Kansas Companies anticipated 

they would need to pursue alternative storage options for 

Wolf Creek if DOE declined to accept spent fuel by 1998. 

Id. at 264. The Kansas Companies tasked Mr. Matthew 

K. Morris, the nuclear engineer responsible for administering the Standard Contract at Wolf Creek, with exploring options to create more available space in Wolf Creek’s 

spent fuel pool. Id. Wolf Creek’s Principal Engineer for 

Nuclear Fuels, Mr. Scott Ferguson, also researched additional storage options. Id. at 261, 296.

The Kansas Companies concluded their spent fuel 

storage study in 1995. The report evaluated six options: 

(1) plant operations/fuel design; (2) increased in-pool 

storage; (3) dry storage technologies; (4) shipment to 

private interim storage facilities; (5) shipment to a federal 

facility; and (6), combinations of the first five alternatives. 

Id. at 264. The report concluded that the best three 

options were reracking the storage pool, dry cask storage, 

or a combination of the two. Id. at 266. 

The Kansas Companies ultimately decided to rerack 

the storage pool. Id. Under this option, they removed the 

existing racks from the pool, replaced them with higher 

density racks, and placed them closer together while still 

maintaining sufficient cooling flow. Id. The Kansas 

Companies installed the racks with the help of a contractor, Holtec International. 

While conducting the rerack, the Kansas Companies 

both increased their storage capacity and used racks that 

could support higher enrichment fuel assemblies. Joint 

App. at 120; 311; 638-39. These higher enrichment fuel 

assemblies allowed Wolf Creek to achieve the same energy output from the reactor with fewer fuel assemblies. 
5 KANSAS GAS & ELECTRIC CO v. US

This reduced the number of assemblies purchased and 

discharged. Id. at 122. The rerack project was completed 

in the spring of 2000. KG & E, 95 Fed. Cl. at 268. 

Of course, the Government did not proceed to collect 

and dispose of SNF and HLW on January 31, 1998. This 

court has previously held that the Government thus 

partially breached the Standard Contract with the nuclear energy industry. See N. States Power Co. v. United 

States, 224 F.3d 1361, 1367 (Fed. Cir. 2000) and Me. 

Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 

1343 (Fed. Cir. 2000). Therefore, the trial court in this 

case focused on the quantum of damages owed to the 

Kansas Companies on account of the Government’s 

breach. The trial court found that even if the Government 

had not breached the Standard Contract, Wolf Creek 

would have run out of wet storage by 2005, “necessitating 

alternative storage measures.” Id. at 278. Thus, the trial 

court, in applying this court’s precedent in Yankee Atomic 

Power Co. v. United States, 536 F.3d 1268 (Fed. Cir. 

2008), required the Kansas Companies to both prove their 

damages and show what costs, if any, they would have 

experienced absent the breach. KG & E, 95 Fed. Cl. at 

273–74, 277. 

The Kansas Companies presented numerous alternative storage measures they would have pursued in the 

non-breach world. The trial court found that the Kansas 

Companies would have pursued a low-cost measure 

wherein Wolf Creek would receive credit for the soluble 

boron already present in the water in the spent fuel 

storage pool. Id. at 295–96. Boron is a neutron absorber 

that can control the reactivity of spent fuel, and the 

Nuclear Regulatory Commission had issued “criticality 

credit” to several utilities for the boron present in their 

pools. This credit would have allowed Wolf Creek to store 
KANSAS GAS & ELECTRIC CO v. US 6

fuel assemblies at a greater density, thus resolving its 

short-term storage issues. 

The trial court also found that the Kansas Companies 

would have performed “a gate-drop analysis” in the nonbreach world. Id. at 280, 298. Due to the structure of 

Wolf Creek’s pool, 18 storage cells were directly under a 

large moveable gate which, if it accidently fell into the 

pool, could have damaged fuel assemblies stored below. 

Id. at 279-80. These storage cells could not be used 

without “doing the appropriate analysis to show that, if 

[the gate] was to drop, that it would not damage the fuel 

causing a release.” Id. at 280. This analysis would have 

occurred in the non-breach world, allowing Wolf Creek to 

store fuel in these 18 cells. The trial court found such an 

analysis would have cost at least $100,000. Id. at 298. 

After determining the costs in the non-breach world, 

the trial court examined the Kansas Companies’ direct 

costs of mitigating the Government’s breach. The trial 

court awarded $9.7 million for the rerack project, “less 

$100,000 in costs that [the Kansas Companies] minimally 

would have incurred but for the breach . . . .” Id. The 

trial court disallowed the Kansas Companies’ claim for 

the costs associated with the alternative storage options 

study conducted by Messrs. Morris and Ferguson. Specifically, the trial court noted that Morris and Ferguson 

adequately accounted for their time in studying all options, but made “no effort . . . to apportion this time to the 

rerack alternative. . . .” Id. at 297. 

The trial court also awarded overhead costs. The 

Kansas Companies divided overhead into three pools of 

costs: labor overhead ($160,467.99), material overhead 

($260,725.47), and construction overhead ($3,420,935.18). 

Id. at 298. The parties did not dispute the labor overhead. Id. In operating Wolf Creek, the Kansas Compa-
7 KANSAS GAS & ELECTRIC CO v. US

nies account for overhead costs using a “total-cost allocation method.” Id. at 299. They have used this method 

since 1987, and the method complies with Federal Energy 

Regulatory Commission (“FERC”) regulations regarding 

the allocation of costs between a particular capital project 

versus the applicable overhead account. Id. at 298–99. 

The trial court concluded that the Kansas Companies’ 

use of total-cost accounting was reasonable for business 

purposes, but stated that “what makes for good business 

accounting does not translate automatically into a fair 

and reasonable apportionment of damages.” Id. at 308. 

The trial court found that the total-cost allocation method 

included the cost of construction materials in its base 

overhead rate, the inclusion of which “unreasonably 

inflates the amount of construction overheads.” Id. at 

309. Thus, the trial court reduced the Kansas Companies’ 

construction overhead award by sixty percent, or the 

“approximate percentage amount of material charges 

relating to the rerack project compared with the total cost 

of the project.” Id. Thus, this judgment awarded the 

Kansas Companies their requested labor and material 

overhead costs, but only $1,368,374.07 for construction 

overhead. 

Lastly, the trial court found that the Kansas Companies realized a “real world savings” due to the ability to 

use higher enrichment fuel assemblies at Wolf Creek. Id.

at 310. The net effect of the rerack was a savings of at 

least $800,000, and the trial court reduced the Kansas 

Companies’ total award by this amount. The total award 

to the Kansas Companies was $10,632,454.83. 

The Kansas Companies appeal the trial court’s reduction in damages for the supposed benefit they received 

from the new fuel racks. They also appeal the trial court’s 

analysis of their construction overhead costs. Lastly, they 
KANSAS GAS & ELECTRIC CO v. US 8

appeal the trial court’s refusal to award damages for the 

costs of studying alternative storage options and for their 

costs of capital. 

This court has jurisdiction under 28 U.S.C. § 

1295(a)(3). 

II. 

This court reviews the factual findings of the Court of 

Federal Claims for clear error, Indiana Michigan Power 

Co. v. United States, 422 F.3d 1369,1373 (Fed. Cir. 2005), 

including “the general types of damages awarded . . . , 

their appropriateness . . . , and rates used to calculate 

them . . .,” Home Savings of America v. United States, 399 

F.3d 1341, 1347 (Fed. Cir. 2005). “A finding may be held 

clearly erroneous when . . . the appellate court is left with 

a definite and firm conviction that a mistake has been 

committed.” Ind. Mich., 422 F.3d at 1373 (quoting In re 

Mark Indus., 751 F.2d 1219, 1222–23 (Fed. Cir. 1984)). 

This court reviews the trial court’s legal conclusions 

without deference. Yankee Atomic, 536 F.3d at 1272. 

This court provides the trial court with wide discretion in 

determining an appropriate quantum of damages. HiShear Tech. Corp. v. United States, 356 F.3d 1372, 1382 

(Fed. Cir. 2004). 

As a general rule, “[a] non-breaching party is not entitled, through the award of damages, to achieve a position 

superior to the one it would reasonably have occupied had 

the breach not occurred.” LaSalle Talman Bank, F.S.B., 

v. United States, 317 F.3d 1363, 1371 (Fed. Cir. 2003) 

(citing 3 E. Allen Farnsworth, Farnsworth on Contracts 

193 (2d ed. 1998)). See also United States v. City of Twin 

Falls, 806 F.2d 862, 873–74 (9th Cir. 1986) (contract 

damages to non-breaching party are reduced by gains 

after breach because contract damages seek only to “fairly 

compensate the injured party for his loss”); Restatement 
9 KANSAS GAS & ELECTRIC CO v. US

(Second) of Contracts § 347 cmt. e (“The injured party is 

limited to damages based on his actual loss caused by the 

breach. If he makes an especially favorable substitute 

transaction, so that he sustains a smaller loss than might 

have been expected, his damages are reduced by the loss 

avoided as a result of that transaction.”). 

Damages do not extend to remote consequences of the 

breach. Similarly, mitigation efforts may result in direct 

savings that reduce the damages claim. LaSalle, 317 F.3d 

at 1371; Citizens Fed. Bank, FSB v. United States, 59 Fed. 

Cl. 507, 526 (2003) (finding that the benefits of mitigation 

must be credited to the government as the breaching 

party). Thus, “where the defendant’s wrong or breach of 

contract has not only caused damage, but has also conferred a benefit upon plaintiff which he would not otherwise have reaped, the value of this benefit must be 

credited to defendant in assessing the damages.” LaSalle, 

317 F.3d at 1372 (quoting Charles T. McCormick, Handbook on the Law of Damages 146 (1935)). 

The Kansas Companies claim the trial court erred in 

reducing their damages by $800,000 for the benefits they 

received from the rerack project, i.e., the ability to use 

higher-enrichment fuel and purchase fewer fuel assemblies. The Kansas Companies claim that any benefit they 

received was too remote and not directly related to the 

breach because the decision to “pursue more highly enriched fresh nuclear fuel” was an “independent business 

decision” and influenced by the market price of uranium 

conversion, enrichment, and fabrication. Corrected Brief 

for Plaintiffs-Appellants 28–30. They also argue that the 

benefit was not immediate because it accrued over time as 

Wolf Creek procured fresh fuel for its reactor. 

The trial court correctly reduced the Kansas Companies’ damages to account for efficiency benefits from the 
KANSAS GAS & ELECTRIC CO v. US 10

rerack project. First, the Kansas Companies acquired 

higher enrichment fuel as a direct consequence of the 

decision to rerack the wet storage pool. To alter either 

the storage configuration of the wet storage pool or the 

enrichment levels of fuel used at Wolf Creek, the NRC 

had to approve a license amendment. Joint App. at 358. 

In 1998, as part of its mitigation efforts, Wolf Creek 

sought NRC approval to both rerack its fuel storage pool 

and to use higher enrichment fuel assemblies. See Environmental Assessment, 63 Fed. Reg. 68,478 (Dec. 11, 

1998) (“The proposed action would revise the [Wolf Creek] 

technical specifications to allow an increase in the [Wolf 

Creek] spent fuel pool (SFP) storage capacity and to allow 

an increase in the maximum nominal fuel enrichment to 

5.0 nominal weight percent U-235.”); Notice of Issuance of 

Amendment, 64 Fed. Reg. 14,950 (March 29, 1999) (granting the amendment to Wolf Creek’s license). 

The Kansas Companies’ internal engineering and contract documents also confirm that the purpose of the 

rerack project was both to “increase Wolf Creek on-site 

spent fuel storage capacity and to allow an increase in the 

maximum allowable nominal fuel enrichment stored in 

the spent fuel pool to 5.0 [nominal weight percent] U235.” Joint App. at 638–39. Indeed, Mr. Richard Muench, 

former President and Chief Executive Officer of Wolf 

Creek, testified that the Kansas Companies conducted an 

evaluation to show it was more economical to switch to 

higher enrichment fuel, and that they took “the opportunity to go to the higher enrichment at the same time we 

were switching our racks.” Id. at 310–11 (emphasis 

added). Thus the record shows that the decision to pursue 

higher enrichment fuel assemblies was not an independent business decision but part and parcel of the Kansas 

Companies’ mitigation efforts. 
11 KANSAS GAS & ELECTRIC CO v. US

The record also shows that the higher enrichment fuel 

assemblies produced a real-world benefit. Mr. Morris 

testified that the new racks allowed Wolf Creek to use 

higher enrichment fuel assemblies and thus to purchase 

fewer assemblies. KG & E, 95 Fed. Cl. at 310; Joint App. 

at 122. Mr. Muench confirmed that the net effect of 

switching Wolf Creek to higher enrichment fuel was a 

savings of “hundreds of thousands of dollars per cycle,” 

and that at least four fuel cycles had occurred since 

mitigation. KG & E, 95 Fed. Cl. at 310; Joint App. at 311. 

The trial court found that this constituted a “real-world 

savings,” and accordingly reduced the damages. This 

court does not lightly disturb such a factual finding. Cf.

Citizens Bank v. United States, 66 Fed. Cl. 179, 204 (2005) 

(denying the government’s request to reduce damages in a 

Winstar case because, while the government was entitled 

to reduction in damages for any benefit obtained through 

the breach as a matter of law, the thrift “did not in fact 

realize any of these benefits”). 

The Kansas Companies’ argue that this benefit was 

too remote because it accrued over time as influenced by 

market forces. As noted above, the Kansas Companies 

chose at the time of the breach and mitigation to pursue 

higher enrichment fuel assemblies. The long-term benefit 

of fuel cost savings does not sever its connection to the 

Kansas Companies’ mitigation efforts. 

This court upheld a similar damages determination in 

LaSalle Talman Bank, a Winstar case. Talman Bank, in 

mitigation of the Government’s breach of contract, received a cash infusion of $300 million. Because the cash 

infusion was a direct result of the Government’s breach, 

this court upheld a reduction in damages to account for 

benefits arising from the infusion. 317 F.3d at 1373–74. 

Ultimately, the benefit was calculated as the earnings 

generated by the $300 million cash infusion from 1992 
KANSAS GAS & ELECTRIC CO v. US 12

(the date of mitigation) to 2003. LaSalle Talman Bank, 

F.S.B., v. United States, 64 Fed. Cl. 90, 112-13 (2005), 

aff’d, 462 F.3d 1331 (Fed. Cir. 2006). This court did not 

change that reduction even though the plaintiff’s earnings 

resulted from uncertain market forces over time. The 

same result applies in this case. 

By enhancing the racks to accommodate highenrichment fuel assemblies, the Kansas Companies 

mitigated the Government’s breach in a way that produced a benefit. While the passage of time causes greater 

realization of the benefit and market forces may influence 

a future valuation of the benefit, the Kansas Companies 

have, as of the time of this litigation, received a benefit as 

a direct result of their mitigation activity. Thus, the trial 

court correctly reduced the Kansas Companies’ damages 

by the amount of the benefit received in mitigating the 

Government’s partial breach of the Standard Contract. 

This court’s precedent in Dominion Resources, Inc. v. 

United States, 641 F.3d 1359 (Fed. Cir. 2011) does not 

alter this decision. In Dominion, the government asserted 

that because “Dominion’s one-time [disposal] fee was not 

yet payable because of the government’s breach, Dominion may have profited by having use of the money in the 

meantime.” Id. at 1364. This court affirmed the trial 

court and refused to allow the government to question 

whether Dominion received a benefit, but it did so as a 

matter of contractual interpretation. Id. at 1364–65. The 

Standard Contract provides options for the payment of 

the fee and expressly states that if the utility chooses to 

wait to pay the fee, interest is to be calculated “from April 

7, 1983, to the date of the payment based upon the 13-

week Treasury bill rate.” Id. at 1364. Because the parties 

agreed ex ante to a one-time fee with interest at the 

thirteen-week Treasury bill rate, Dominion could not “ask 

for increased damages should its investment of the one-
13 KANSAS GAS & ELECTRIC CO v. US

time fee return less than the thirteen-week rate, and the 

government [could not] ask for a reduction in damages 

should Dominion’s investments return more.” Id. at 1365. 

This case does not feature the contractual concerns that 

governed the Dominion case. 

III. 

The Kansas Companies incurred overhead costs when 

managing their rerack operations to mitigate the breach. 

The Kansas Companies maintain an accounting system 

which tracks and apportions all overhead costs. The 

accounting system, termed “a total-cost allocation methodology,” uses a two-step process to determine the percentage overhead rate. 

In the first step, the capitalized administrative costs, 

indirect labor costs, and labor overheads on indirect labor 

for each department are split between capital projects and 

plant operations based on the amount of work the department does to support each of those functions. KG & 

E, 95 Fed. Cl. at 299; Joint App. at 416–17. The portion 

assigned to capital projects is called the “available to 

allocate pool.” For example, the Kansas Companies’ 

accounting department allocated 6% of the CEO’s time 

towards construction projects, and 94% of his time to 

plant operations. Joint App. at 418. Thus, 6% of the 

CEO’s labor costs were allocated towards the plant’s total 

construction overhead. 

Next, the available to allocate pool is divided by the 

total costs of the planned capital projects for the year for 

the capital budget. KG & E, 95 Fed. Cl. at 300. This 

equation yields the construction overhead rate. The end 

result of the total cost allocation method is that the largest capital projects receive the largest share of the overhead pool allocations, while smaller capital projects 

receive smaller allocations. Id. 
KANSAS GAS & ELECTRIC CO v. US 14

The Kansas Companies make these calculations annually. Joint App. at 416–17. However, throughout any 

given year, these calculations are compared against 

actual expenditures on direct costs to account for any 

discrepancies. Review of the overhead rate occurs on at 

least a quarterly basis. KG & E, 95 Fed. Cl. at 300. 

The Kansas Companies have used the “total-cost allocation method” for material overhead and construction 

overhead calculations since 1987. Id. at 299–300. This 

accounting method complies with FERC accounting 

regulations. FERC requires that all major electric utilities meet certain accounting standards called the Uniform 

System of Accounts. See 18 C.F.R. § 101 (2012). The 

standards require utilities to use an accounting system 

that properly measures, inter alia, direct and indirect 

overhead construction costs. Id. The records must “be so 

kept as to show the total amount of each overhead for 

each year, the nature and amount of each overhead 

expenditure charged to each construction work order and 

to each electric plant account, and the bases of distribution of such costs.” Id. In this case, the record shows that 

the Kansas Companies’ cost accounting method complied 

with FERC regulations. KG & E, 95 Fed. Cl. at 298. 

As explained in Indiana Michigan, “damages for 

breach of contract are recoverable where: (1) the damages 

were reasonably foreseeable by the breaching party at the 

time of contracting; (2) the breach is a substantial causal 

factor in the damages; and (3) the damages are shown 

with reasonable certainty.” 422 F.3d at 1373 (citing 

Energy Capital Corp. v. United States, 302 F.3d 1314, 

1320 (Fed. Cir. 2002)). Once a company has proved that 

certain work was undertaken because of the breach, it 

may proceed to prove the amount of the associated cost 

(including both direct and indirect costs) by any available 

and reasonable technique. Energy Nw. v. United States, 
15 KANSAS GAS & ELECTRIC CO v. US

641 F.3d 1300, 1309 (Fed. Cir. 2011). These reasonable 

techniques need not prove damages with Cartesian certainty. Id. (citing Ferguson Beauregard/Logic Controls v. 

Mega Sys., LLC, 350 F.3d 1327, 1345 (Fed. Cir. 2003)). 

This court upholds an internal accounting system as 

showing overhead costs with reasonable certainty when it 

allocates a portion of the expenses to a particular project 

using codes, Carolina Power & Light Co. v. United States, 

573 F.3d 1271, 1276-77 (Fed. Cir. 2009), when it allocates 

according to accepted accounting principles, Energy Nw., 

641 F.3d at 1309, and when it allocates with accounting 

procedures that comply with mandatory FERC regulations, System Fuels, Inc. v. United States, 666 F.3d 1306, 

1311-12 (Fed. Cir. 2012). See also, Vt. Yankee Nuclear 

Power Corp. v. Entergy Nuclear Vt. Yankee, --- F.3d ----, 

2012 WL 2126813, at *15–16 (Fed. Cir., June 13, 2012) 

(reversing the Court of Federal Claims when it denied 

damages for overhead costs despite acknowledging that 

the utility’s accounting practices followed GAAP and 

FERC regulations); Consolidated Edison Co. of N.Y., Inc. 

v. Entergy Nuclear Indian Point 2, LLC, 676 F.3d 1331, 

2012 WL 1284402, at *7–8 (Fed. Cir. 2012) (reversing the 

Court of Federal Claims’ denial of damages for overhead 

costs when the utility proved the costs with a separate 

accounting system compliant with FERC regulations). 

This case bears strikingly similarity to System Fuels

and Consolidated Edison. In each of these cases, the 

utilities in question maintained a separate accounting 

system to allocate overhead costs, and these accounting 

methods were compliant with FERC regulations and 

generally accepted accounting principles (“GAAP”). 

Consolidated Edison, 2012 WL 1284402, at *7; Sys. Fuels, 

666 F.3d at 1311. In each of these cases, the trial court 

found that the method employed by the utilities was 

“imprecise,” resulting in inflated overhead costs, and it 
KANSAS GAS & ELECTRIC CO v. US 16

denied portions of the utilities’ overhead costs as a result. 

In each of these cases, this court reversed the trial court, 

holding that where the utilities used accounting procedures as mandated by FERC and consistent with GAAP, 

the utilities’ accounting records sufficiently demonstrated 

damages with reasonable particularity. Consolidated 

Edison, 2012 WL 1284402, at *7; Sys. Fuels, 666 F.3d at 

1312. 

In light of this record, the trial court erred by denying 

the Kansas Companies a portion of their overhead damages calculated via the total-cost allocation method. The 

Kansas Companies used an internal accounting system 

which coded costs to specific projects, the allocation rates 

were re-examined on a regular basis in order to reflect 

actual capital project costs, and the total-cost allocation 

method complied with required FERC accounting regulations. The trial court explicitly recognized that the totalcost allocation method was a “reasonable” technique, 

stating: “the court has no quarrel with [the Plaintiffs’ 

damages expert’s] characterization of Wolf Creek’s use of 

the total-cost method as a reasonable form of cost accounting for business purposes. The fact that Wolf Creek 

has used this method since 1987 confirms this point.” KG 

& E, 95 Fed. Cl. at 308. Therefore, this court reverses the 

trial court’s denial of damages for overhead costs calculated via the total-cost allocation method as inconsistent 

with precedent and the record. 

IV. 

The Kansas Companies also appeal the trial court’s 

denial of damages for the costs of a report authored by 

Messrs. Morris and Ferguson. The report, begun in 1994, 

analyzed nearly two dozen spent fuel storage options. 

Joint App. at 101, 364, 597. While the total hours spent 

by Messrs. Morris and Ferguson in preparing the report 
17 KANSAS GAS & ELECTRIC CO v. US

were adequately accounted for, the trial court stated that 

“[b]ecause no effort was made to apportion this time to 

the rerack alternatives, the court disallows the additional 

Morris and Ferguson labor.” KG & E, 94 Fed. Cl. at 297. 

Viewing the record as a whole, this court notes that 

the trial court found, and the Kansas Companies have not 

challenged, that the first scheduled collection of Wolf 

Creek’s spent fuel in the non-breach world would have 

occurred in 2006. Id. at 278. But, as the trial court also 

found, “2006 would have been one year too late for Wolf 

Creek; by spring 2005, accumulating SNF would have 

overcome Wolf Creek’s dwindling available storage, 

necessitating alternative storage measures.” Id. The 

trial court concluded that, after reviewing its options, 

Wolf Creek most likely would have pursued using soluble 

boron to lower the reactivity of the storage pool, thus 

mitigating its dwindling storage capacity. 

Thus, the record shows that Wolf Creek would have 

had to pursue alternative storage measures in both the 

breach and non-breach worlds. In other words, it would 

have needed similar research in both worlds to determine 

future options. The trial court denied breach world damages for the costs of such research “[b]ecause no effort was 

made to apportion this time to the rerack alternatives . . . 

.” Id. at 297. In other words, the Kansas Companies did 

not meet their burden of proving any overlap between the 

costs of studying alternative storage options in the breach 

versus the non-breach worlds. Without record evidence 

about the research costs in both worlds, the trial court 

could not perform the necessary comparison between the 

breach and non-breach worlds and thus could not accurately assess the damages. See Yankee Atomic Elec. Co., 

526 F.3d at 1273; Glendale Fed. Bank, FSB v. United 

States, 239 F.3d 1374, 1380 (Fed. Cir. 2001) (instructing 

that plaintiffs bear the burden of demonstrating “what 
KANSAS GAS & ELECTRIC CO v. US 18

might have been”); Bluebonnet Sav. Bank FSB v. United 

States, 67 Fed. Cl. 231, 238 (2005) (“[B]ecause plaintiffs in 

this case are seeking expectancy damages, it is incumbent 

upon them to establish a plausible ‘but-for’ world.”). 

Thus, the Court of Federal Claims did not err in disallowing damages for the spent fuel storage study. 

V. 

The Kansas Companies also appeal the trial court’s 

denial of damages for the cost of capital to fund its mitigation activities. The utilities seek to recover $466,977 in 

cost-of-capital damages for the financing of the breachrelated projects. 

In Energy Northwest, this court held that the nointerest rule barred parties to the Standard Contract from 

recovering the costs of financing mitigation projects. 641 

F.3d at 1310–13 (citing 28 U.S.C. § 2516(a)); see also Sys. 

Fuels, 666 F.3d at 1310–11. In Boston Edison Co. v. 

Untied States, the court held that the “commercial enterprise exception” to the no-interest rule did not apply in 

the context of the NWPA. 658 F.3d 1361, 1371 (Fed. Cir. 

2011). Consistent with these decisions, this court affirms 

the trial court’s denial of the Kansas Companies’ cost of 

capital claims. 

VI. 

The Kansas Companies’ method for calculating overhead costs was reasonable and complied with FERC 

accounting standards. As such, this court reverses the 

trial court’s refusal to accept these calculations. This 

court affirms the remainder of the trial court’s decision. 

As such, there is no need to address the issues raised in 

the Government’s cross-appeal. 
19 KANSAS GAS & ELECTRIC CO v. US

AFFIRMED-IN-PART AND REVERSED-IN-PART 

COSTS

Costs to Plaintiffs-Appellants. 
United States Court of Appeals 

for the Federal Circuit 

__________________________ 

KANSAS GAS AND ELECTRIC COMPANY, 

KANSAS CITY POWER & LIGHT COMPANY, 

AND KANSAS ELECTRIC POWER COOPERATIVE, 

INC., 

Plaintiffs-Appellants, 

v. 

UNITED STATES, 

Defendant-Cross Appellant. 

__________________________ 

2011-5044, -5045 

__________________________ 

Appeals from the United States Court of Federal 

Claims In No. 04-CV-099, Judge Christine O.C. Miller. 

__________________________ 

LINN, Circuit Judge, dissenting in part. 

The majority concludes that when the Kansas Companies used Federal Energy Regulatory Commission 

(“FERC”)-compliant accounting practices to allocate 

overhead to their mitigation efforts, they were dispositively entitled to recover the full amount of that overhead 

as damages. I respectfully disagree. When, as here, a 

trial court is presented with evidence that regulatoryaccounting practices were used to calculate the amount of 

overhead attributable to mitigation projects, that amount 

is presumptively a correct measure of damages for overhead. And our precedent firmly establishes that a trial 
2 KANSAS GAS & ELECTRIC CO v. US

court is not free to disregard it simply because it questions the precision of the accepted accounting practice. 

But the fact that a regulatory-compliant accounting 

practice is followed should not prevent a trial court from 

considering other record evidence showing that the 

amount claimed as damages based on such accounting 

practice is grossly disproportionate to the actual damages 

incurred. Nor does it overshadow the substantial discretion a trial court enjoys in crafting its damages award or 

the clear error standard of review applicable to fact questions such as this. 

Here, the United States Court of Federal Claims 

(“trial court”) did not disregard evidence of accepted 

accounting practices. Rather it determined, in view of the 

record as a whole, that in this case such practices reflected an overhead amount that was a demonstrably 

inaccurate reflection of the damages incurred. Rather 

than simply deny overhead damages altogether, the trial 

court used all of the evidence of record to craft a more 

correct and therefore more reasonable award. In so doing, 

the trial court carefully considered the record in general, 

and the testimony of the experts in particular, in treating 

as an issue of first impression the question of whether the 

total-cost overhead allocation methodology provided a 

correct measure of damages. Kan. Gas & Elec. Co. v. 

United States, 95 Fed. Cl. 257, 307 (2010). In analyzing 

this question, the trial court first observed that plaintiffs’ 

damages expert, Professor Jerold Zimmerman, who 

testified that this methodology was reasonable and for a 

“valid business purpose”: 

never asked for or was given Wolf Creek’s 

raw financial data, nor did he talk with 

Wolf Creek’s accounting personnel. . . . 

[Nor was he asked] to review whether 

Wolf Creek’s $3.7 million in claimed construction and material overheads derived 

from the correct measure of damages. Tr. 
 KANSAS GAS & ELECTRIC CO v. US 3

at 1865. In fact, Prof. Zimmerman admitted that he was not “charge[d]” with “opining on the numbers” . . . . Tr. at 1883 

(“Well I didn’t have to [review Wolf 

Creek’s raw financial data] to assess the 

logical flaws in [defendant’s expert,] Mr. 

Johnson’s report. Since I wasn’t opining 

on the numbers, one can look at the logical 

analysis and say whether the logic is correct without actually looking and testing 

the numbers.”). 

Id. The trial court also looked to the testimony of defendant’s expert, R. Larry Johnson, and noted: 

Mr. Johnson testified that the total-cost 

method is not widely used in the cost accounting community. Tr. at 1705-06 (citing, inter alia, Professor Zimmerman’s 

cost accounting textbook analysis of a survey of allocation methodologies using 293 

respondents in which total-cost method 

does not appear). . . . Mr. Johnson analogized how the total-cost method creates 

disproportionate overheads to the use of 

“gold wire” rather than steel in constructing a wheel. If five different projects each 

had $100.00 in labor overhead, a total of 

$500.00 in direct labor would be allowed, 

and each project would receive a twenty 

percent (or $20.00) allocation of overhead 

based on the labor. Mr. Johnson then 

added the material costs of steel wire to 

four of the five projects costing $10.00 

each, but the fifth project used gold wire 

costing $1000.00. Because the amount of 

labor expended remains constant, the fifth 

project does not consume more overhead 

resources. However, under the total-cost 
4 KANSAS GAS & ELECTRIC CO v. US

allocation, four of the projects would receive a $7.00 overhead allocation rather 

than $20.00, and the gold wire project 

would receive $72.00. 

Id. at 306. 

Based on a meticulously-documented examination of 

the factual record, the trial court explained that it had: 

no quarrel with [the] characterization of 

Wolf Creek’s use of the total-cost method 

as a reasonable form of cost accounting for 

business purposes. . . . However, what 

makes for good business accounting does 

not translate automatically into a fair and 

reasonable apportionment of damages. . . . 

[Rather,] the allocation method used to 

calculate these overhead amounts must 

bear some relationship to the resources 

actually expended. In cross-examining 

Mr. Robke, [who was responsible for accounting on the rerack project,] defendant 

established that the construction material 

costs—that is, the cost of the racks—bore 

no relationship to Wolf Creek’s resources 

expended on the rerack project. . . . [T]he 

exchange with Mr. Robke shows that, if 

the racks did—hypothetically—cost $12 

million rather than $6 million, the totalcost allocation methodology doubles the 

overhead allocated for those materials 

without any actual change in internal resources. . . . The material cost of the 

rerack project clearly was not the driver of 

the construction overheads, and it did not 

affect the internal support provided to the 

project. 

Id. at 308. 
 KANSAS GAS & ELECTRIC CO v. US 5

 The trial court thus determined “that the total-cost 

method’s inclusion of the cost of construction materials in 

its allocation base unreasonably inflates the amount of 

construction overheads” and, on the facts found, cannot be 

solely relied upon to support a reasonable damages 

award. Id. at 309. 

I see no error, let alone clear error, in the trial court’s 

careful treatment of the evidence in making its reasonable damages determination. The majority points to no 

clear error and, indeed, makes only passing reference to 

the record in its analysis. Without addressing the expert 

testimony or the trial court’s findings of fact, the majority 

concludes that because “[t]he Kansas Companies used an 

internal accounting system which coded costs to specific 

projects, [because] the allocation rates were re-examined 

on a regular basis in order to reflect actual capital project 

costs, and [because] the total-cost allocation method 

complied with required FERC accounting regulations” the 

trial court’s “denial of damages for overhead costs . . . 

[was] inconsistent with precedent and the record.” Maj. 

Op. at 16. While the majority’s statements all sound 

eminently reasonable, they fail to consider the real issue. 

As noted above, the trial court did not take issue with the 

accounting method as being reasonable, nor with the 

premise that it was accurately applied. Rather, it rested 

its decision on the observation that if plaintiffs were 

allowed to include the cost of disproportionately expensive 

materials in the total cost analysis, the government 

unreasonably would be held responsible for costs that had 

nothing to do with the capital project to which they had 

been attributed or with the government’s breach. To this 

point, the trial court quoted the testimony of Mr. Johnson, 

who explained: 

Did [Wolf Creek’s] accounting department 

incur more costs because [they] bought $6 

million in casks? Did [Wolf Creek’s] human resources department incur more 
6 KANSAS GAS & ELECTRIC CO v. US

costs because [they] bought $6 million in 

casks? And the answer I think to those 

things has to be “no.” 

95 Fed. Cl. at 308-9. As the trial court then stated, 

“Plaintiffs failed to rebut this argument.” Id. at 309. 

Thus, the whole point of the trial court’s explanation is 

that even assuming plaintiffs correctly used the total-cost 

methodology to calculate overhead, the resulting damages 

request, given the facts of this case, was simply wrong. 

The majority does not address the evidence or the 

trial court’s reasoning based on the record, but instead 

relies on System Fuels, Inc. v. United States, 666 F.3d 

1306 (Fed. Cir. 2012), and Consolidated Edison Co. of 

New York v. Entergy Nuclear Indian Point 2, LLC, 676 

F.3d 1331 (Fed. Cir. 2012), to elide the significance of the 

facts found. In my view, neither System Fuels nor Consolidated Edison supports such treatment because neither 

of those cases can be fairly read to stand for the proposition that once it is established that an accepted accounting method was used, the trial court’s role in finding the 

correct measure of overhead damages is at an end. And 

nothing in either case says that the trial court must 

disregard contrary evidence once accounting compliance 

has been shown. 

In System Fuels, this court explained that the trial 

court clearly erred when it found that records of generally 

accepted accounting practices “did not demonstrate the 

effect of the mitigation project on [overhead pools] with 

reasonable particularity.” System Fuels, 666 F.3d at 1312 

(quotations omitted). But there, the trial court refused to 

award any amount merely because “[p]laintiffs . . . were 

unable to verify exactly what portion of the capital suspense loader was incurred for work exclusively on [the 

mitigation project].” System Fuels, Inc. v. U.S., 78 Fed. 

Cl. 769, 800 (2007) (emphasis added). Similarly, in Consolidated Edison, this court applied System Fuels in 

rejecting the trial court’s determination that accepted 
 KANSAS GAS & ELECTRIC CO v. US 7

accounting methodology was “too ‘imprecise.’” Consol. 

Edison, 676 F.3d at 1340 (citation omitted). The trial 

court’s annunciation of a “precision” requirement there 

was tantamount to an incorrect gloss on the reasonable 

certainty requirement in our damages cases, see, e.g., 

Indiana Michigan Power Co. v. United States, 422 F.3d 

1369, 1373 (Fed. Cir. 2005), and was properly reversed as 

such. In any case it was a far cry from a specific, 

grounded, factual determination, as the trial court made 

here, demonstrating that the plaintiffs’ proposed measure 

of damages was not merely approximate, but actually and 

plainly wrong.1

These cases establish that business-reasonable accounting methods are good evidence of damages. But 

neither case establishes that when evidence of the use of a 

generally accepted method of accounting is present, the 

 1 The majority also relies upon this court’s recent reversal of the trial court in Vermont Nuclear Power Corp. 

v. Entergy Nuclear Vermont Yankee, --- F.3d ----, 2012 WL 

2126813 (Fed. Cir. June 13, 2012) to support its contention that GAP and FERC-compliant accounting is per se

proof of the correct measure of overhead damages. This 

reliance is equally misplaced. There, the trial court had 

refused to allow any damages for the portion of an overhead pool attributed to breach-related projects by accepted accounting practices because imprecision in the 

calculation of the total overhead pool made “the recovery 

of capital suspense loader charges dubious.” Entergy 

Nuclear Vt. Yankee, LLC v. United States, 95 Fed. Cl. 160, 

194-95 (2010) (quotation omitted). But unlike Entergy 

Nuclear, the trial court here did not merely disregard 

accepted accounting practices as “imprecise.” Instead, it 

looked to the record as a whole and determined that while 

recovery of overhead damages was appropriate, it was 

necessary to adjust the requested amount in order to 

correct a known and specific inaccuracy. 
8 KANSAS GAS & ELECTRIC CO v. US

trial court need not consider relevant evidence of aberrant 

results stemming from the use of such method. Nor could 

they: Our precedent states that “[d]amages for a breach 

of contract are recoverable where . . . [in relevant part] 

the damages are shown with reasonable certainty.” Id. 

(emphasis added). Nothing prohibited the trial court from 

adjusting its damages award even though it was reasonably certain that the requested amount was wrong. 

Evidence that generally accepted accounting practices 

were followed does not obviate examination of the underlying facts and should not nullify the trial court’s role as 

the weigher of evidence, the finder of facts, and the crafter 

of reasonable damages awards. Here, the trial court 

properly fulfilled that role, and nothing in the majority’s 

opinion suggests that the trial court’s assessment of the 

facts was clearly erroneous. 

Because the trial court’s fact-finding as to overhead 

was not clearly erroneous, and because its reduction of 

the requested amount was not an abuse of its discretion, I 

would affirm the trial court’s overhead award. For these 

reasons, I respectfully dissent from section III of the 

majority opinion.