Reliant Settles Energy Crisis-Era Disputes

Reliant signed a memorandum of understanding settling claims related to electricity crises-era charges with California, Oregon, and Washington, as well as the "California Parties"—including the states' three major investor-owned utilities—on August 12. The value of the settlement is $445 million, which includes a cash payment of $150 million, according to Reliant. The deal resolves market price investigations by the states and California's civil litigation against the company. It is subject to Federal Energy Regulatory Commission approval. "With these issues and the uncertainty they created behind us, we look forward to continuing to play a constructive role in helping to meet the state of California's future energy needs," stated Joel Staff, Reliant chair and chief executive officer. "Reliant was one of the Four Horsemen of the Apocalypse who rode in from Texas," stated Attorney General Bill Lockyer. He lumped the company in with Enron, Dynegy, and El Paso, which, he claimed, "broke the rules and violated the law." The 'California parties' include Pacific Gas & Electric, Southern California Edison, San Diego Gas & Electric, the Department of Water Resources, and the state attorney general. PG&E is set to get more than one-half of the total?about $230 million, according to the utility. That includes $186 million for alleged electricity overcharges and manipulation. Also included for PG&E is $40 million for alleged overcharges and manipulation of gas prices. Another $15 million will go toward paying attorney fees, according to the attorney general. Seven million dollars will go to Oregon and Washington. Another $3 million will be disbursed to munis and water districts. Earlier settlements cost Reliant $64.6 million. Reliant also agreed to extend its "must-offer" commitment for two years-making energy from its plants available on demand to the California Independent System Operator. "Settlements are in the best interests of consumers, the industry, and the success of California's power market redesign effort," stated Joe Kelliher, FERC chair. Kelliher has promised to speed the remaining energy crisis settlement process. Standard & Poor's also agreed that it was in the best interests of the industry to settle. Right after the deal was announced, S&P said it is "favorable for Reliant's credit. The rating agency notes, however, that there's a criminal case still pending that could cost the company $150 million. Settlements to Date The major fines and settlements with energy traders and sellers include: August 15, 2005: $445 million for Reliant, including $150 million in cash and waiving claims to its receivables for energy delivered between January 2000 and June 2001. March 3, 2005: A $4 million settlement agreement with Coral Energy Resources resolving an investigation into responses the company provided the commission in a prior investigation. January 13, 2005: $750 million with Mirant, which includes liberating the company (which declared bankruptcy in July 2003) from any FERC penalties. The deal also distributes funds to the state?s utilities, DWR, and the Attorney General's Office. December 7, 2004: FERC finalizdes Duke's $207 million settlement noted below. December 6, 2004: $12.5 million civil penalty on Mirant Energy Marketing from the Commodity Futures Trading Commission. The fine is for misreporting trades to industry journals. October 25, 2004: $267 million FERC settlement with Dynegy and partner NRG Energy in West Coast Power. This is the first settlement that includes the pre?October 2000 time frame. The amount includes the earlier settlement. July 22, 2004: $32.5 million forfeiture of unjust profits ordered for Enron. The commission said Enron violated its market-based rate authority. July 13, 2004: $207.5 million from Duke Energy. Of that, $16.6 million earmarked for the Department of Water Resources for its out-of-market purchases to cover Duke. Assigns $122 million owed Duke from the California Independent System Operator and California Power Exchange and $85 million in cash. July 2, 2004: Forgiving of $137 million that Williams Energy claims it was owed from California utilities. Utilities to transfer more than $100 million sitting in escrow at the former California Power Exchange to Williams. January 20, 2004: $3 million from a Dynegy/NRG Energy joint venture for alleged 2000-01 manipulation. The venture, West Coast Power, is set to pay into a U.S. Treasury fund for California and other Western consumers. November 14, 2003: $7.9 million for Coral Power proposed by commission staff. November 13, 2003: $1.6 billion settlement for El Paso allegedly withholding gas supplies, causing prices for gas used to make electricity to rise during the energy crisis. October 31, 2003: $7.2 million for Sempra Energy Trading, largely for settling allegations of "Get Shorty" transactions—selling ancillary services where none may have existed. October 2003: $50 million for Reliant Resources to settle most gaming allegations. September 2003: $332,000 for Mirant for potential profits from cutting nonfirm power, circular scheduling, load-shifting, and paper trading. August 2003: About $2 million in total settlements with American Electric Power, Aquila, Morgan Stanley Capital Group, PacifiCorp, Portland General, Puget Sound Energy, Reliant, Redding, San Diego Gas & Electric, and Williams Energy. July 2003: $15.5 million for El Paso Electric along with FERC suspending its market-based rate authority for more than two years. January 2003: $13.8 million settlement between FREC and Reliant Energy for withholding energy from the grid. December 2002: $417 million settlement with Williams by the California attorney general for investigations and lawsuits. Reduced price of long-term contract with DWR by $180 million. Gave San Diego and San Francisco six turbines. July 2002: $122 million in penalties levied by the California Independent System Operator for not following dispatch orders. Dynegy, Reliant, and Williams got the harshest judgments. April 2002: 6 million AG settlement with Calpine on enforcement issues. April 2002: 2.5 million AG settlement with Constellation on enforcement issues. March 2001: $124 million in refunds granted by FERC through CAISO for bids over the price cap. April 2001: $8 million settlement between FERC and AES/Williams on withholding. July 1999: $57 million in payments made to suppliers beginning in 1999 rescinded by CAISO.

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Reliant Settles Energy Crisis-Era Disputes

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