AG Settles for $160 Million Refund from Los Angeles Utility Company

The Los Angeles Department of Water and Power, the nation’s largest municipal utility, agreed to settle a lawsuit by paying $160 million in cash and credits for allegedly overcharging public agencies for more than a decade.

The settlement with the state attorney general’s office is nearly $64 million less than the damages awarded by a judge last year, but the office said it was willing to take less money to avoid what promised to be a lengthy appeals process.

The utility agreed to pay the settlement in cash and energy credits and provide money for energy-efficiency upgrades to various agencies it allegedly overcharged. The largest share goes to the Los Angeles Unified School District, with more than $25 million in cash and $28 million for energy upgrades.

“Los Angeles Water and Power was not following the law,” said state Attorney General Jerry Brown. “They were charging fees that were not permitted. Now we can distribute some badly needed funds.”

The settlement includes $67.8 million that will be placed in a restricted account and used to implement programs to lower power consumption, utility officials said. The rest of the money and credits will be distributed to Los Angeles County, the Metropolitan Transportation Authority, the Community College District, UCLA and the state.

“We are pleased to have fashioned an agreement which will enable energy efficiency improvements and overall lowered energy usage for the plaintiffs in this action,” said H. David Nahai, the utility’ chief executive. “We can also take comfort in the fact that the involved parties are government entities whose constituents are largely LADWP customers.”

A Superior Court judge in June 2007 had ordered the utility to pay more than $223.8 million in damages for overcharges dating back to at least 1988.

Deputy Attorney General Jacqueline Dale said the settlement was reached in anticipation of the utility filing an appeal. She said the case could have lasted for years and gone to the state Supreme Court.

The judge’s ruling came after a six-week trial in which several public agencies claimed the DWP was improperly charging its customers and passed on the overcharges to the City Council to fund city programs.

The judge found the transfer of funds from the DWP to the city treasury was a prohibited tax.

The settlement.