Risk & Compliance

Duke Energy Charged with Kickback Scheme

The company allegedly paid big corporate customers as much as $100 million since 2004 to get them to support a rate hike.
Stephen TaubJanuary 18, 2008

Employees of Duke Energy have acknowledged payments of about $22 million a year to big corporate customers as part of a deal the utility made to get an electric rate increase in southern Ohio, The Cincinnati Enquirer reported Friday.

In a class-action antitrust lawsuit filed by a group of lawyers on behalf of Ohio consumers, the plaintiffs charge that Duke paid kickbacks to large companies in the Cincinnati area to gain support for a rate hike, according to the newspaper.

The lawyers claim that the Charlotte, North Carolina–based company has paid as much as $100 million in rebates since 2004 to its biggest customers as part of the scheme, the Enquirer reported. The alleged conspirators cited in the suit funneled the kickbacks through a sham entity they created called Cinergy Retail Services, according to the suit.

The utilities commission approved the rate hike, which resulted in higher commercial and industrial electric rates in 2005 and a 30 percent boost in residential electric rates in 2006, according to the report. The utility that actually made the rate request was Cinergy Corp., which was bought by Duke in 2006.

“They were running a rebate program to the detriment of every other consumer,” Stan Chesley, one of the lawyers who filed the suit, told the Cincinnati paper.

Last year, a former Duke employee, John Deeds, made similar charges. He filed a whistle-blower lawsuit accusing the utility of firing him when he questioned large payouts to companies, according to the report. The lawsuit is still pending.

“Duke Energy believes the allegations are without merit and will vigorously defend itself,” the utility said in a statement. “The contracts in question were the subject of extensive litigation before the Public Utilities Commission of Ohio (PUCO), which affirmed Duke Energy Ohio’s rates after full disclosure and review of the transactions.”

Duke also stated that PUCO “properly determined that parts of the transactions should remain confidential and Duke Energy will not comment further upon those transactions or the pending litigation.”