Putting to rest at least part of its concern related to its failed performance-based rate (PBR) scheme that ran from 2000 through 2002, Naperville, IL-based Nicor Inc. announced Tuesday that it has been advised by the U.S. Attorney for the Northern District of Illinois that the government is closing its inquiry and will not seek to prosecute the company or any individuals in connection with the ill-fated plan.
The U.S. attorney in 2002 issued a notification of inquiry related to the company's actions in connection with the accounting for natural gas costs pursuant to the PBR plan (see Daily GPI, Dec. 12, 2003).
In July (see Daily GPI, July 10), the company announced that it had reached a tentative agreement with the Securities and Exchange Commission (SEC). The tentative settlement is still subject to the approval of the SEC commissioners. Under that settlement, Nicor agreed to pay a fine of $10 million to settle an investigation related to the accounting methods subsidiary Nicor Gas Co. used to determine natural gas costs under its PBR plan. The PBR plan was in effect from 2000 through 2002, and according to state officials, Nicor Gas overcharged consumers and misled regulators about it (see Daily GPI, Dec. 11, 2003; April 12, 2002).
Nicor Gas's PBR was approved in 1999 by the Illinois Commerce Commission. Following an investigation, the Citizens Utility Board (CUB), the Illinois consumer watchdog group, urged state regulators in early 2002 to scrap Nicor's PBR because CUB said it had allowed the gas distributor to charge customers at least $27 million more than they would have paid under standard ratemaking rules. CUB alleged that the plan set a benchmark price for gas that allowed Nicor to keep 50% of the savings it achieved if its costs were below that price.
The company's problems with its PBR program came to a head in July 2002, when Nicor announced that it would have to revise all of its 1Q2002 earnings and exclude all of its 2Q2002 earnings for the PBR program at Nicor Gas. The Nicor board appointed a special independent committee to investigate the subsidiary's natural gas purchases, sales, transportation and storage, and after the investigation, Nicor restated four years of financial results. Nicor also agreed to pay $38.5 million to settle a class-action lawsuit related to the PBR program in April 2004 (see Daily GPI, April 20, 2004). The SEC launched a formal investigation in 2002 of both the PBR program as well as Nicor Energy, which was a joint venture with Dynegy Inc. (see Daily GPI, Aug. 10, 2004).
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