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Enron Mail |
----- Forwarded by Jeff Dasovich/NA/Enron on 03/13/2001 10:05 AM -----
"Ronald Carroll" <rcarroll@bracepatt.com< 03/13/2001 08:50 AM To: <gfergus@brobeck.com<, <jdasovic@enron.com<, <jhartso@enron.com<, <jsteffe@enron.com<, <rsanders@enron.com<, <smara@enron.com<, <sbishop@gibbs-bruns.com< cc: Subject: Fwd: Colleges Sue Enron for Pulling Power Plug ----- Message from "Tracey Bradley" <tbradley@bracepatt.com< on Tue, 13 Mar 2001 08:01:23 -0600 ----- To: "Andrea Settanni" <asettanni@bracepatt.com<, "Charles Ingebretson" <cingebretson@bracepatt.com<, "Charles Shoneman" <cshoneman@bracepatt.com<, "Deanna King" <dking@bracepatt.com<, "Jeffrey Watkiss" <dwatkiss@bracepatt.com<, "Gene Godley" <ggodley@bracepatt.com<, "Kimberly Curry" <kcurry@bracepatt.com<, "Michael Pate" <mpate@bracepatt.com<, "Paul Fox" <pfox@bracepatt.com<, "Ronald Carroll" <rcarroll@bracepatt.com<, "Randall Rich" <rrich@bracepatt.com< Subject: Colleges Sue Enron for Pulling Power Plug FYI Colleges Sue Enron for Pulling Power Plug / UC, CSU Say Firm Plans Resale at Higher Price ( March 13, 2001 ) The University of California and the California State University system are accusing energy giant Enron of breaking contracts to provide low-cost electricity to state campuses so the company can sell the power at higher prices on the spot market. The two university systems are asking a federal judge to block the Houston-based energy broker from abandoning four-year contracts. Those contracts guaranteed the universities a reliable supply of power at prices 5 percent below the capped rate created under the state's 1996 deregulation law. The schools say Enron Energy Systems Inc., which promised them protection from the uncertainties of California's deregulation, is now trying to force them to rely on Pacific Gas and Electric Co. and Southern California Edison -- the two utilities nearly bankrupted by skyrocketing electricity prices. Enron says the universities will still be guaranteed the price provided in the contracts until the deals run out in March 2002. But at least some of the electricity will now have to be purchased for the campuses by the state Department of Water Resources on the expensive spot market. Prices on the short-term market can be many times greater than prices in long-term deals like those between Enron and the universities. The state or utilities, which cannot charge customers the full cost of electricity because of the rate cap, would be liable for the difference between the current utility rate and the spot market cost. The state, which stepped in as buyer of power in January after the debt-ridden utilities defaulted on payments to power plants, has already spent $3.2 billion buying electricity for utility customers. If Enron gets out of its contracts with UC and CSU, the state also would have to buy as much as 450 megawatts for the two universities. That's enough to power 450,000 homes. In a civil complaint filed Friday in federal court in Oakland, the universities contend that Enron wants to be free to take advantage of soaring market prices for electricity by reselling low-cost power it controls under contracts originally meant to serve the college campuses. "Enron is seeking to capitalize on the energy crisis to reap enormous profits," the civil suit alleges. Enron spokeswoman Peggy Mahoney denied the accusation. "We do not have any power purchased in blocks," Mahoney said. "It is fundamentally not true." Nettie Hoge, executive director of the Utility Reform Network in San Francisco, called the move by Enron "outrageous." "These people have been gouging us and making profits," she said. "If they are making less on some long-term contracts, they should stay with it." Marty Sunde, vice chairman of Enron Energy Services, said he was "shocked" by the lawsuit and believes it is driven by fear of the unknown. "We absolutely, positively are honoring our contract," Sunde said. "(The universities) have a 5 percent discount off the frozen tariff rate." Mahoney said Enron will continue to honor other terms of the contracts by providing billing and advice on how the colleges can minimize their energy use. But Eric Behrens, an attorney for UC, said Enron cannot fulfill those parts of the contracts because it has asked the utilities to rip out thousands of meters that provided information to the company about electricity use on the campuses. The utilities are installing their own meters at the schools. Behrens said UC, one of the largest single users of electricity in the state, went through a laborious process to shift onto Enron's system, spending $1,500 for each of the 2,000 new meters. Even if Enron honors the low rate until the contracts expire, Behrens said, its abrogation of the deals could expose UC and CSU to extra costs of as much as $297 million in coming years by forcing them to become utility customers again. Those customers will probably have to cover a major share of the billions in debt that the utilities and the state have racked up over the past year as wholesale prices for power went through the roof. Until Feb. 1, when Enron took steps to drop them, the universities were so-called direct access customers of Enron. Direct access, a key piece of the state's deregulation plan, was originally intended to lower prices for consumers by allowing companies to compete with the utilities. But the state Legislature, concerned that too many customers were fleeing the utilities, recently passed a bill that could suspend any new contracts under the direct access program. Mahoney said Enron is being forced to release all its direct access customers because the debt-laden utilities have stopped paying Enron and other providers a required rebate. Other residential and institutional customers also are being returned to the utilities. Enron, for example, is returning the San Francisco Giants to PG&E even though the energy company signed a contract to provide electricity to Pacific Bell Park through 2010.
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