Bankrupt Mirant Corp. on Friday said that it has reached a settlement with FERC staff related to the sale of ancillary services in California. Mirant settled for $3.66 million, which the company said is a fraction of the approximately $28 million alleged by the California parties in the original claim made against the company.

Ancillary services are various types of generation capacity held for contingency purposes, such as the loss of critical generation or a transmission facility. Ancillary services act as replacement reserves for the California ISO to operate its system reliably.

“As we have clearly stated in the past, Mirant operates by the rules,” said Doug Miller, the company’s senior vice president and general counsel. “We are confident our actions complied with the market rules set by the California Independent System Operator and by FERC.” Miller said that Mirant “is settling today to put this matter behind us and avoid the significant investment in time and money required to fight this suit. This settlement is not an admission of guilt.” He also noted that FERC Chairman Pat Wood “asked that the parties try to settle these issues. Mirant continues working to comply.”

Mirant believes the settlement represents a prudent business decision. Due to the time and expense involved in protracted litigation, Mirant determined that it would be expeditious to settle the matter and move on.

Mirant said that the settlement is subject to approval by the bankruptcy court. The settlement will also require the blessing of the full Commission. Mirant filed for Chapter 11 protection in July.

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