August 15, 2005
Reliant settles with California utilities
NEW YORK (Reuters) - A group of California utilities on
Monday said they have reached a settlement worth as much as
$525 million with Reliant Energy Inc., resolving claims that
Reliant had overcharged them during the state's 2000-2001 power
Reliant becomes the last major independent power producer
to settle with utilities and the state of California after
years of allegations that energy wholesalers had gouged an
already-fragile market at a time when the state desperately
needed more electricity.
The settlement, subject to approval by state and federal
regulators, included PG&E Corp.'s Pacific Gas & Electric Co.
unit, Edison International's Southern California Edison unit
and Sempra Energy's San Diego Gas & Electric unit.
The three California utilities said the settlement was
worth $525 million, including $65 million in refunds previously
ordered by federal regulators.
PG&E said its share of the settlement was about $230
million, while Edison pegged its portion at more than $130
million, and San Diego Gas & Electric said its piece was just
more than $42 million.
Reliant said in a statement the total value was $445
A Reliant spokeswoman said the discrepancy stems from the
accounting treatment the company applied to receivables on its
books. While the utilities may recognize the settlement as $525
million based on their own accounting, the spokeswoman said,
from Reliant's perspective the economic value was $445 million.
According to Edison, it would be the third-largest
settlement by an independent generator in California to date,
after El Paso Electric Co.'s $1.7 billion deal in March 2003
and Enron Corp.'s $1.52 billion deal in July 2005.
Reliant will take an estimated $350 million pretax charge
in the third quarter. The company said as part of the deal it
will waive claims to receivables for power deliveries from
January 1, 2000, to June 21, 2001, plus interest.
Reliant also said the settlement would resolve pending
class-action suits and state investigations. The utilities said
attorneys general in Oregon and Washington were also party to
Representatives from the three utilities were not
immediately available to explain the accounting involved in the
deal, although some of the settlement included accounting for
receivables. Also, other state parties were involved in the
Shares in Reliant and Sempra were fractionally higher, and
shares in Edison and PG&E similarly lower, in early Monday
trade on the New York Stock Exchange.