Item
7.01 Regulation
FD Disclosure.
Legislative
leaders from the state of Illinois, including the Speaker of the House
and the
Senate President, announced a comprehensive transitional rate relief package
for
electric consumers on July 23, 2007. This rate relief package and related agreements are subject to passage of certain legislation. These agreements are a result of several months
of
negotiations among leaders of the Illinois House of Representatives
and
Senate, the office of the Attorney General of the State of Illinois and
various Illinois utilities and power generators. The expected program,
once effective,
is expected to provide $1.001 billion to help fund a new power procurement agency and provide assistance
to
utility customers in Illinois.
As
a part of this rate relief package, and subject to passage
of
certain legislation, Dynegy Holdings Inc. (“DHI”), a wholly owned subsidiary of
Dynegy Inc. (“Dynegy”), anticipates making payments of up to $25 million over a
29-month period. These payments will be contingent on certain conditions related
to
the absence of future electric rate and tax legislation in Illinois. DHI anticipates
making payments of $7.5 million in 2007, $9.0 million in 2008 and $8.5
million
in 2009, and to record a $25 million charge in the second quarter
of
2007. DHI’s payment of $7.5 million in 2007 is to be used as funding for the
Illinois Power Agency, which is to be created as part of Illinois’ comprehensive
legislative package. DHI’s expected payments for 2008 and 2009 will be made in
monthly installments, provided that if at any time prior to December 2009,
as
further described in the rate relief package and related agreements, Illinois imposes an electric rate
freeze or
imposes an additional tax on generators, DHI’s obligations to make the monthly
payments will cease. The monthly payments will be paid into an escrow account
established to support rate relief activities for Ameren Illinois Utilities’
customers.
The
rate relief package and related agreements, once effective, will result in motions to dismiss with prejudice being filed in
several
ongoing court and regulatory cases surrounding the 2006 Illinois reverse power procurement auction, including the Federal Energy Regulatory
Commission complaint (filed in March 2007), the appeals of the original Illinois Commerce Commission
orders adopting the auction process and the auction improvements case.
As a result of the rate relief package and related
agreements, once effective, Dynegy and DHI expect
that
the contracts originally entered into as part of the auction will remain in place as between Dynegy Power Marketing Inc.
and
the Ameren Illinois Utilities.
Pending
legislation must be passed by the Illinois House and Senate and be signed
by the
Governor before the rate relief package and related agreements become effective. It is expected that this
process will be completed by the end of the month.
The
information in this Item 7.01 on Form 8-K shall not be deemed to be “filed” for
the purposes of Section 18 of the Securities Exchange Act of 1934 (the
“Exchange Act”), or otherwise subject to the liabilities of such section, nor
shall such information or exhibit be deemed incorporated by reference in
any
filing under the Securities Act of 1933 or the Exchange Act, except as
shall be
expressly set forth by specific reference in such a filing.
FORWARD
LOOKING STATEMENTS
Certain
statements included in this Form 8-K are intended as “forward-looking
statements.” These statements include assumptions, expectations, predictions,
intentions, or beliefs about future events, particularly the statements
concerning: anticipated donations to the transition relief fund, their
amounts,
their timing or usage; any statements regarding legal, judicial or regulatory
proceedings; and contracts resulting from the 2006 auctions. Dynegy and
DHI
caution that actual future results may vary materially from those expressed
or
implied including: the expected agreements may not be approved by any of
the
following, the Illinois House, the Illinois Senate or the Illinois Governor;
they may be modified by any of the parties prior to being finalized; the
Federal
Energy Regulatory Commission may choose to pursue the matter independent
of the
state’s withdraw of the complaint; and Dynegy and DHI may not be allowed the
benefit of the bargain resulting from the 2006 auction. More information
about
the risks and uncertainties relating to these forward-looking statements
is
found in the SEC filings of Dynegy and DHI, including their Annual Reports
on
Form 10K for year ended December 31, 2006 and their Quarterly Reports on
Form
10-Q for the quarter ended March 31, 2007.