Duke Energy under fire from lawyers, enviros, investors

It's been a rough week for Southern power giant Duke Energy.

A federal lawsuit filed this week accuses the Charlotte, N.C.-based utility of paying off opponents to its 2004 Ohio rate hike with as much as $100 million in special rebates, arguing that the special deals represented fraud that hurt other consumers. The rebate program was launched by Cinergy before Duke's 2005 merger with the Cincinnati-based power provider.

The attorneys behind the suit against Duke include Stanley Chesley, an Ohio trial lawyer whose first claim to fame arose from his role following the 1977 Beverly Hills Supper Club fire that killed 165 people. Rather than sue just the nightclub, Chesley targeted the entire aluminum electrical wire industry, eventually winning $49 million in verdicts and settlements. Chesley has also been involved in other high-profile cases including suits against Pan Am over the Lockerbie terrorist attack, Dow Corning over breast implants, and the $246 billion tobacco settlement on behalf of state governments.

In an official statement, Duke Energy said it "believes the allegations are without merit and will vigorously defend itself."

Also this week, Duke Energy and its plans to expand a coal-fired power plant in western North Carolina have been the target of full-page attacks ads running in newspapers across the state. Sponsored by the N.C. Waste Awareness and Reduction Network, the ads call on citizens to press for the cancellation of the Cliffside project by e-mailing CEO Jim Rogers and by urging the media, N.C. Gov. Mike Easley and other public officials to stand up to Duke Energy. The ads quote Dr. James Hansen, director of NASA's Goddard Institute:

"Business-as-usual, if it continues for even another decade, will be disastrous .... Stopping this new coal plant is the best thing North Carolina can do to slow global warming."

Last month N.C.WARN and 10 other groups sent a letter to Rogers urging him to reconsider the Cliffside expansion due to its impact on the climate. The 800 megawatt Cliffside plant would release 6 million tons of greenhouse gases annually for the next 50 years and would double daily water evaporation from present levels to 21 million gallons per day. Much of North Carolina, including the region where the plant is located, is currently experiencing an exceptional drought.

As if that weren't enough trouble for one week, Moody's Investor Service this week downgraded its outlook for Duke Energy from "Positive" to "Stable," saying the company's expected cash flow will not be enough to cover significant capital investments planned for this year. The company's shares fell 11 cents following the announcement.