Press Release

PUC Considers Settlement with Duquesne Light Over Corporate Compliance Issue

Published on 1/27/2006

Filed under: Electric

HARRISBURG – The Pennsylvania Public Utility Commission today considered a settlement with Duquesne Light that addresses a corporate compliance issues and included a contribution of $250,000 by the company to its programs to help low-income families. The Commission will accept comments on the settlement until Feb. 6, 2006.

The settlement agreement, reached between the PUC’s independent prosecutory staff and Duquesne Light, follows an informal investigation into the utility granting an interest rate decrease from 8 percent to 5 percent on a $250 million loan to an affiliate without PUC approval. The issue was discovered during periodic management and operations audit of the company conducted by the Commission’s audit staff. The agreement also provides that the penalty will be paid by the utility and will not be recovered in rates paid by customers.

“Consumers should find comfort knowing that the Commission’s continuing audits of the utility companies are protecting their interests and finding these types of corporate governance concerns,” said Chairman Wendell F. Holland. “I thank the parties for working together to reach a Settlement Agreement especially one where the financial penalties leveled against the company are dedicated to helping those who need it most.”

Under the terms of the settlement, the company will direct $250,000 to its Stay Warm Programs that are designed to help eligible low-income families and seniors this winter. A motion by Vice Chairman James Cawley called for any unspent funds not used in the company’s winter 2005-2006 Stay Warm Program be transferred to the company’s consumer Assistance Program (CAP). The motion passed by a vote of 5-0.

“Due to the number of households enrolled in Duquesne’s CAP, we believe it to be under-funded,” Vice Chairman Cawley said. “To be consistent with the spirit of the proposed settlement, any unspent funds that remain at the end of this winter should continue to be available to help low-income people and be transferred to the company’s CAP.”                   

During the informal investigation, the prosecutory staff found that Duquesne violated certain affiliated interest provisions of the Public Utility Code by failing to obtain prior Commission approval of the December 2001 transaction and that the company’s failure to properly document the interest rate change was “unreasonable and inconsistent with the public interest,” according to the prosecutory staff.

The company denies that it violated any provisions of the code of any of the Commission’s regulations.

In addition to the contributions to its Stay Warm programs, Duquesne Light has agreed to the following:

• Accept from Duquesne Holdings a cash contribution equal to the difference between the interest paid and the interest that would have been paid had the interest remained at 8 percent – a total of about $27.6 million.
• Establish procedures designed to ensure documentation of Duquesne’s Board of Directors’ approval for all inter-company loans and appropriate Commission approvals of the same.

The Pennsylvania Public Utility Commission ensures safe, reliable and reasonably priced electric, natural gas, water, telephone and transportation service for Pennsylvania consumers, by regulating public utilities and by serving as responsible stewards of competition.

For more information about the PUC and additional press releases, visit our website at www.puc.state.pa.us.

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Docket No. M-00051929

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