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Attorney General Lockyer Announces $460 Million Settlement with Reliant to Resolve Energy Crisis Refund Claim, Lawsuits

Texas Firm Gouged Ratepayers, Withheld Power and Manipulated Market
Monday, August 15, 2005
Contact: (415) 703-5837

(SACRAMENTO) – Attorney General Bill Lockyer today announced a $460 million settlement with Reliant Energy, Inc. that will resolve claims the company gouged ratepayers, withheld power and manipulated electricity and natural gas prices during the California Energy Crisis of 2000-01.

“Reliant was one of the Four Horsemen of the Apocalypse who rode in from Texas and ran roughshod over California consumers, taxpayers and businesses,” said Lockyer. “Along with Enron, Dynegy and El Paso Corp., they broke the rules and violated the law. This settlement holds Reliant accountable for its substantial role in the ripoff that was the Energy Crisis.”

Besides Lockyer, who represented the people, other California parties to the proposed settlement include: the California Department of Water Resources (CDWR), staff of the California Public Utilities Commission (CPUC), the Electricity Oversight Board (EOB), Pacific Gas & Electric (PG&E), Southern California Edison (SCE), San Diego Gas & Electric (SDG&E) and private class action plaintiffs. Washington Attorney General Rob McKenna and Oregon Attorney General Hardy Myers also are parties.

The $460 million includes $453 million for California parties, including the class action plaintiffs, and $7 million for Washington and Oregon.

The $453 million provided the California parties includes at least $135.4 million in cash, at least a $299.5 million write-off of unpaid bills “owed” Reliant by the utilities it gouged during the Energy Crisis, and $10 million in interest.

Of California’s $453 million, about $430.5 million will accrue to the benefit of ratepayers. Another $4.5 million will go to the private class action plaintiffs, $15 million will cover attorney fees and costs, and $3 million will be disbursed to a number of local municipalities and water districts.

Before it becomes final, the settlement must be approved by the Federal Energy Regulatory Commission (FERC) and CPUC. In California, the settlement would resolve the state parties’ refund claims pending before FERC, an antitrust lawsuit filed against Reliant by Lockyer, an investigation by Lockyer into manipulation of natural gas prices by Reliant and the now-defunct Enron Online, and the private class actions.

The $435 million for California ratepayers would compensate businesses and individuals for overcharges, reduce the financial burden of PG&E ratepayers under that utility’s bankruptcy settlement, and reduce all utility ratepayers’ obligation to retire bonds sold by the state to finance power purchases at the height of the Energy Crisis. Most likely, ratepayers will see the benefits in future rate adjustments approved by the CPUC.

The $460 million settlement with California, Oregon and Washington parties comes on top of earlier agreements reached between Reliant and FERC. Those settlements resolved charges Reliant deliberately withheld electricity from the market to inflate wholesale prices. Under the FERC settlements, Reliant paid a total of $64.6 million. So, all told, Reliant will pay $524.6 million to resolve claims arising from its conduct during the Energy Crisis.

With today’s settlement, California now has resolved Energy Crisis-related claims with all five out-of-state companies which bought power plants from investor-owned utilities when the state made its disastrous move to a deregulated wholesale electricity market. In addition to Reliant, those companies include Dynegy, Mirant, Williams and Duke.

The Reliant settlement is the 11th produced by Lockyer’s Energy Task Force, working in cooperation with the CPUC, EOB, Governor’s Office, CDWR, PG&E and SCE. The 11 settlements have a combined value of $5.29 billion. Of that total, an estimated $3.23 billion represents California ratepayer relief.

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