Duke Energy said last Tuesday it reached a settlement agreement in principle that resolves all claims for refunds by California, Oregon and Washington parties arising out of the western electricity crisis in the 2000-2001 time period, as well as various class-action complaints against the company by several western states. But the agreement allows California’s attorney general to continue probing the company’s activities in the natural gas market for the next 30 days.

The Charlotte, NC-based energy company will provide $207.5 million in cash and credits in return for parties to the agreement foregoing all claims relating to refunds or other monetary damages for sales of electricity during the period in question, and claims alleging that Duke Energy received “unjust and unreasonable” rates for the sale of electricity during the settlement period, which ranged from January 2000 through June 2001.

The settlement amount includes $85.1 million in cash and $122.4 million in credits and the write-off of receivables, according to Duke Energy spokesman Peter Sheffield. The bulk of the settlement amount will flow to California, but monies will go to Oregon and Washington as well, he said.

California Attorney General Bill Lockyer estimated that $172 million of the Duke Energy settlement will go to the state’s ratepayers to resolve claims of overcharges for electricity. “Viewed with previous settlements, the agreement properly accounts for Duke’s culpability and puts us over the $2 billion mark in our effort to return to Californians the money stolen from them during the energy crisis.”

Lockyer noted that the Duke Energy settlement is the eighth produced by his energy task force, with a combined value of $2.63 billion. The state is seeking a total of about $9 billion in refunds from energy companies.

Duke Energy said it will record an estimated $104.9 million pre-tax charge in the second quarter of this year to reflect the settlement agreement.

Specifically, the company noted the settlement resolves:

California’s Lockyer, however, said the agreement permits him to continue investigating for 30 days Duke Energy’s actions in the natural gas market. If the “due diligence” review turns up no evidence of wrongdoing, he said his probe of the company’s natural gas activities in California would cease. The settlement also would preserve Lockyer’s right to pursue claims against the company for fraud or criminal conduct, Lockyer noted.

Key participants in the settlement included California, Washington and Oregon; FERC; California’s three largest investor-owned utilities, as well as private plaintiffs in electricity-related class action lawsuits. The settlement is subject to approval by FERC and the California Public Utilities Commission (CPUC), while the class-action settlements are subject to court approval, Duke Energy said. The agreement will be filed “in very short order” at both FERC and the CPUC, Sheffield noted.

FERC’s refund proceedings stemmed from the agency’s effort to correct market prices that it considered to be unreasonable during the 2000-2001 western energy crisis. Duke Energy said it entered into the settlement to resolve refund claims against the company, “even though [it] acted appropriately and within the market rules.”

The settlement “brings welcome closure to these protracted proceedings, removing the associated risks and burdens of regulatory and legal uncertainty,” said Duke Energy President Fred Fowler. It is in the “best interest of our shareholders, our company and western energy consumers as we resolve these issues and focus on meeting the current and future energy needs of California and other western states.”

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