A company that sells an energy savings program to schools will end up costing the Sacramento City Unified district more than $700,000 in a settlement and legal fees stemming from a lawsuit.

Energy Education Inc., which had provided its services since 2008, filed a $1.5 million lawsuit in November, saying Sacramento City Unified had stopped paying its bills. The district filed a cross complaint alleging that its board never officially approved the company's contract, and it was never put out to public bid as required by law.

Last month, Sacramento City Unified paid Energy Education $587,000 to settle the suits. As part of the quietly reached settlement, Energy Education and the district agreed to make no negative statements about each other.

In addition to the settlement, Sacramento City Unified paid $150,000 in legal fees and related costs during the lawsuit. The settlement and legal fees were paid out of the district's general fund.

"The district feels that the outcome of the settlement agreement is the best possible resolution, and we are happy to put this matter behind us," Sacramento City spokesman Gabe Ross said in a statement.

Prior to the settlement's "non-disparagement covenant," district officials disputed the effectiveness of Energy Education's program "because of the organization's inability to verify claims of energy savings," Ross said in December.

Sacramento City trustee Patrick Kennedy, who signed the settlement, said Thursday that "this negotiated deal represents a cost savings compared to other outcomes."

Kennedy said he could not comment further.

Court records show that prior to confidential mediation, the lawsuit was headed to trial, which could have proved costly for the school district given the complexity of the energy savings program.

Ross said Thursday that continuing the Energy Education contract would have cost the school district $900,000 each year for the remaining two years on the contract.

In all, the district paid Energy Education nearly $1 million between September 2008 and May 2011, when it stopped making payments.

Mike Gullatt, Energy Education's senior vice president of corporate communications, said in a written statement that the company is pleased with the settlement, which "confirmed the validity of the energy program's significant net savings and provided Energy Education appropriate compensation according to the terms of the contract."

"While we are disappointed to see this partnership end, we are proud of our work in Sacramento City, helping the district reduce energy consumption the past two years and save significant taxpayer dollars," the statement said.

Gullatt said Energy Education has a customized energy-conservation program that helped save the Sacramento City district $5.3 million by reducing energy consumption by 30 percent since 2008.

Prior to the settlement, the school district contended that Dallas-based Energy Education used faulty metrics to determine savings, which resulted in the district paying the firm performance fees of $23,500 a month.

Sacramento City Unified entered into the energy contract in 2008, before the administration of current Superintendent Jonathan Raymond and all but one school trustee, Ellyne Bell.

Gullatt said the company works with 1,200 school districts nationwide. In the region, Energy Education contracts with Rocklin Unified, San Juan Unified, Woodland Joint, Davis Joint, Vallejo City and Yuba City school districts.

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