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Chrysler seeks $2.5M utility deposit from Duke Energy Indiana

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Chrysler Group, the maker of Chrysler, Dodge and Jeep vehicles, appears not to be of sufficient financial caliber for Duke Energy Indiana, which allegedly won’t refund a $2.5 million security deposit it collected after the automaker’s 2009 bankruptcy.

Chrysler on July 5 asked the Indiana Utility Regulatory Commission to be its avenger, requesting an investigation of the dispute and return of the seven-figure deposit—plus interest and “all appropriate penalties.”

In challenging the deposit requirement, the automaker told regulators that Duke Energy “is the only public utility in North America still holding a security deposit from Chrysler.”

Chrysler filed Chapter 11 bankruptcy reorganization in April 2009. It agreed to sell most of its assets, including its Kokomo transmission manufacturing factories, to a new entity partly owned Italy’s Fiat SpA.

As a result, Duke said it would regard Chrysler as a new customer and demanded a security deposit, according to the complaint. Chrysler refused, saying it paid its electric bills consistently and on time.

Charlotte, N.C.-based Duke assessed late penalties, and in September 2009 issued a final disconnection notice for the Kokomo facilities, Chrysler told the commission.

The following month Chrysler wired a $2.5 million deposit to the utility's Plainfield unit.

 “Duke has held and retained those funds, together with accrued interest, through the present time,” the complaint states.

Chrysler said Duke won’t budge despite numerous requests and 32 months of a “clean payment history.” The automaker sought a meeting last March with Duke’s Indiana president, Douglas Esamann, to no avail.

Duke, according to Chrysler, has said it won’t return the deposit until the automaker satisfies three criteria: 12 consecutive months of payments within terms, a Standard & Poor’s long-term credit rating of BB or better and “a determination by Duke of financial position and acceptability of risk following a review of four recent quarters of financial statements.”

Chrysler calls the requirements unreasonable and discriminatory, saying it has “enjoyed substantial success” since reorganization.

Chrysler earned $183 million on $55 billion in sales last year. It had $9.6 billion of cash. In the first quarter of this year, Chrysler posted profit of $473 million on sales of $16.4 billion.

Since 2009, Chrysler announced two new transmission lines in Kokomo to be built for $1.3 billion.

“The economic development benefits of those investments secure some 3,500 jobs at the Kokomo facilities. Nearly 1,000 jobs have been added at the Kokomo plants since the Chapter 11” in 2009, Chrysler attorney Todd Richardson, of Indianapolis law firm Lewis & Kappes, told the commission.

Duke Energy Indiana spokesman Lew Middleton said the utility is reviewing the complaint and will file a response with the IURC.

“The company’s policy for requiring security deposits from large commercial and industrial customers is reasonable and has been applied in a non-discriminatory manner, based on an assessment of risk,” Middleton said.

Duke disagrees with Chrysler’s characterization of the dispute “and [we] look forward to providing more information to the IURC,” he added.

Included in the legal crossfire may be whether the Duke deposit policy lacks objective or ascertainable standards—whether it ultimately amounts to Duke conducting a subjective review of financial information.

Richardson points to commission orders made in 2010 involving Northern Indiana Public Service Co. and Kokomo Gas and Fuel Co. The commission found insufficient objective criteria in the deposit rules proposed by the utilities. The commission called “particularly draconian” a proposal to hold funds until an account was closed.

“The situation in which Chrysler now finds itself is exactly the ‘draconian’ predicament described by the commission in that order,” Richardson argues.

“We value all of our customers and our deposit policies are designed to minimize the overall costs to all customers,” said Duke’s Middleton.

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  • Driving Customers Away?
    Somebody will invent a better mousetrap, then Duke will be out of luck. They are creating a lot of ill will which will ultimately hurt their business.
  • Would you co-sign?
    Utilties provide you a service and then ask you to pay later, which is not like most products and services. In essence, the customer is being given credit. Ask yourself, would you co-sign for Chrysler? Would you loan them money?
  • Duke
    Chrysler claim
  • Chrysler v. Duke
    I hope Chrysler can get punitive damages assessed.

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