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Reliant to pay $460 million

Power plant owner settles claims that it manipulated prices

SHARE Reliant to pay $460 million

Reliant Energy Inc., owner of five power plants in California, agreed to pay $460 million to settle claims it manipulated electricity prices and gouged consumers during the state's energy crisis in 2000 and 2001.

Reliant will pay $453 million to California and three utilities plus $7 million to settle claims by Washington and Oregon, California Attorney General Bill Lockyer said in a statement Monday. About $130 million of the payment will be used to lower power rates for customers of Southern California Edison beginning in January, the utility said in a statement.

The settlement resolves claims that Reliant withheld power to profit from higher electricity and natural gas prices while rates were surging 10-fold and consumers endured blackouts. Reliant still faces U.S. criminal charges of shutting down power plants and submitting false bids to benefit from the crisis. The company has denied the allegations.

The settlement also ends all private electricity-related class action lawsuits filed on behalf of ratepayers in Utah, California, Washington, Oregon and Idaho.

"This clears the decks of all the loose cannons," said RBC Capital Markets analyst Lasan Johong in New York, by resolving the last civil complaint against Reliant for its power trading activity. He rates the shares "buy" and owns none.

Reliant still faces the possibility of a $32 million payment if found guilty in the criminal case, Johong said. He thinks the company is likely to settle that case.

"This agreement represents a significant milestone in the continuing effort to recover for our customers past unjust power charges," John E. Bryson, chief executive of Edison International, parent of Southern California Edison, said in a Business Wire statement. "All five major independent California generators have now settled refund claims we have pursued."

Reliant, along with Duke Energy Corp., Dynegy Inc., Mirant Corp. and Williams Cos., sold electricity from plants that California required its utilities to divest under a state law aimed at promoting competition in the power business. The five, along with El Paso Corp. and Enron Corp., have agreed to $5.15 billion in state settlements in the past 2 1/2 years.

As part of the settlement, Reliant will pay $135.4 million in cash and forgo $299.5 million that it is owed by the three utilities, Lockyer said.

Reliant "ran roughshod over California consumers, taxpayers and businesses," Lockyer said in his statement. "This settlement holds Reliant accountable for its substantial role in the rip-off that was the energy crisis."

Joel Staff, chairman and chief executive officer of Houston-based Reliant Energy, which did not admit wrongdoing in the matter, said in a statement: "Reliant has taken a critical step forward in resolving a number of issues arising from the California energy crisis."