Duke Energy Ohio plans to settle a suit alleging it gave preferential treatment and kickbacks to certain large business and industrial customers from 2005 to 2008. The kickbacks, according to plaintiffs, were for these larger customers withdrawing their objections to a rate increase. The rate increase was later passed. Duke will pay $81M to settle the suit.
A lawsuit against Duke Energy Ohio alleging that the utility provider created a bogus subsidiary to funnel money to business and large industrial customers won’t make it to trial after all. The parties have agreed to negotiate a settlement in advance of the July trial date. The terms: Duke Energy pays $81M.
Three corporations and an Ohio residential customer filed the suit in 2008. A little history will help make the issue clearer:
- 2003: Cincinnati Gas & Electric, part of Cinergy, submitted a rate increase application.
- 2004: Duke/Cinergy create an allegedly bogus subsidiary, Duke Energy Retail Sales.
- 2006: Duke Energy merges with Cinergy.
- 2015: Duke/Cinergy sell Duke Energy Retail Sales to Dynegy in Houston, Texas. The sale was a part of a $2.8B sale of Midwest power plants.
The plaintiffs claim that Duke Energy Retail Sales paid kickbacks to large business and industrial customers that agreed to withdraw their objections to the proposed rate increase. Sometime later, Ohio’s utility commission approved the rate increase.
Duke Energy Ohio insists that all customers were treated equally and fairly despite the plaintiffs’ allegations. The settlement is the result of Duke’s desire to avoid expensive litigation as well as the chance it could lose the suit.
The breakdown of the settlement is as follows:
- $25M for residential customers during the 2005-2008 period covered by the suit
- $25M to non-residential customers during the same time frame
- $8M for energy programs
- Payment of the plaintiffs’ associated costs and legal fees
While the settlement agreement has yet to be approved by a federal court in southern Ohio, Duke Energy Ohio has already recorded an $81M charge against its early 2015 earnings to cover the settlement.