S&P: Duke Energy settlement positive for credit

Standard & Poor's said Friday that the settlement reached between Duke Energy Corp. (BBB+/negative/A-2) and the Federal Energy Regulatory Commission regarding the outstanding investigation relating to the Western electricity crisis in 2000 and 2001 is a positive event for credit quality.

This is because the agreement reduces regulatory uncertainty and removes overhang related to trading and marketing malfeasance.

The agreement, which requires Duke Energy to pay a $2.5 million fine, addresses allegations of Duke Energy's role in manipulative bidding practices, physical withholding of power, and of performing "wash" trades of natural gas.

In a separate settlement, Duke Energy and the FERC staff reached an agreement (which still needs to be approved by the FERC) that could absolve Duke Energy from having to show cause in allegations of market gaming practices in California, while incurring additional penalties of up to $2 million. While these events are positive, Duke Energy still remains a party in the larger California refund case for which the company has reserved about $90 million.

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