Protracted lawsuit ends with win for Direct Energy, Reed Smith

After a nine-year court battle, a judge has dismissed a case brought by a group of commercial customers who claimed their Pittsburgh electricity supplier had overcharged them, even as the company argued that it had not violated a rate cap in their contract.

Common Pleas Judge R. Stanton Wettick Jr. dismissed the suit June 4, ruling that Strategic Energy did not exceed rate caps or violate its contract with commercial companies who purchased electricity. Strategic Energy was purchased by Direct Energy in 2008. 

“We’re very pleased with the result,” said Nicolle Snyder Bagnell, a partner at Pittsburgh-based law firm Reed Smith LLP, which represented the energy company in the case. “It’s been a very long road to get here, but we’re happy that we’ve gotten this order.”

A group of five companies, including Glassport’s Tech Met Inc., a chemical milling service, introduced the litigation in 2005, claiming Strategic overcharged them for electricity. The original plaintiffs expected to add more than 1,000 other companies to the complaint if the case went to trial.

The lawsuit lingered for most of the past decade, even through Houston-based Direct Energy’s $300 million acquisition of Strategic in June 2008. During that time, preliminary objections, which sought to narrow the scope of the case, and a lengthy discovery period made the lawsuit seem like a marathon.

The plaintiffs were seeking an unspecified monetary amount in damages, which at least exceeded $25,000.

As part of its contract with commercial customers, Strategic Energy had offered a rate cap on its variable rate service. While the plaintiffs said Strategic did not exceed the cap, they argued they were still overcharged.

Strategic purchased electricity from Duquesne Light and sold it to these commercial customers as part of Pennsylvania’s competitive electricity marketplace. The plaintiffs argued that Strategic could only bill them for Duquesne Light’s charges — energy, capacity, transmission, ancillary services, distribution services and applicable taxes — and a 0.3 percent service charge.

But Strategic argued the contract stipulated only that its charges would not exceed the rate cap, and said its pricing formula included more variables than those spelled out by the plaintiffs.

Ultimately, Mr. Wettick issued summary judgment in favor of Strategic Energy, saying that “common sense dictates” Strategic would not set up the type of price structure that the plaintiffs argued existed.

“Strategic buys electricity at different times and at different prices,” Mr. Wettick wrote in his decision. “None of the purchases can be traced to specific customers. Thus, there is no way to calculate the cost of energy for individual customers.”

Michael Sanserino:, 412-263-1969 and Twitter @msanserino.

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