FW: Enron says would not pay California refund

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-----Original Message-----
From: Schmidt, Ann M.
Sent: Wednesday, July 25, 2001 11:22 AM
To: Denne, Karen
Subject: Enron says would not pay California refund

Enron says would not pay California refund
July 25, 2001 12:01 PM ET
By Timothy Gardner
NEW YORK, July 25 (Reuters) - Energy firm Enron Corp. (ENE
<quotelogic.jhtml?ticker=ENE<) would not pay its "minuscule" portion of the
nearly $9 billion California claims energy companies owe the state for
overcharges during the Western power crunch, Enron President and Chief
Executive Officer Jeff Skilling said on Wednesday.
California alleges that electricity generators and marketers owe the state
$8.9 billion for overcharging it during the power crisis from mid-2000 to
last spring. Governor Gray Davis, a Democrat, said he is prepared to go to
court to retrieve the money.
But Enron, the No. 1 U.S. natural gas and electricity marketer, does not
intend to pay its portion of the alleged overcharges. which Skilling said was
"minuscule."
"The $9 billion number is bogus to begin with," Skilling told analysts at a
meeting about Enron's second-quarter earnings in New York. Skilling said
Enron's share of the alleged overcharge is $38.5 million. He said Enron
should in fact recover $32 million in net purchases from California.
At least one sector of California's electricity regulation system agrees that
Enron's involvement was small in the power crisis, in which electricity
prices reached records and rolling brownouts darkened many areas.
Sales records kept by the California Independent System Operator, which
manages most of the state's power grid, show Enron accounted for 0.4 percent
of the alleged $9 billion overcharge.
The Federal Energy Regulatory Commission is meeting on Wednesday in its
biweekly commissioners meeting, in part to consider the refunds after a
federal mediator rejected California's claims. On July 12. FERC Chief
Administration Judge Curtis Wagner swung the issue back to the commission for
further action. Wednesday's meeting is the last scheduled before the
commission takes a month-long break.
STILL ROUNDS TO BE FOUGHT IN CALIFORNIA
Enron's problems in California are far from being settled. A committee of the
California Senate investigating suspected price gouging during the power
crunch recently found Enron in contempt for refusing to disclose confidential
sales and bidding records.
The California Senate last used the contempt ruling in 1929 against a cement
company, but eventually the state's Supreme Court threw out the ruling,
saying the charges were too vague.
Just before the California Senate voted to hold Enron in contempt, the
Houston-based company sued in a California court on a claim that FERC, not
the California Senate, had jurisdiction.
"They (California) are making political noise we don't like," said Skilling.
He said if the situation got worse the company could reduce its market share
there. "We'll walk away from the situation and reserve out," he said.
Although Enron claims little involvement in the alleged overcharge, the
company says it has learned from the crisis.
Skilling said that looking forward, Enron will avoid dealing with
intermediaries that the company contends helped lead to the power crunch.
"We're focused on retail in California; we're going direct to customers
without dealing with an intermediary," said Skilling.
Shares in Enron, which reported earnings slightly better than expected on
July 12, were down 34 cents to $42.90 in early trade on the New York Stock
Exchange. That is down from its peak this year of more than $81, hit in
mid-February in the depths of the Western power crunch.

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REUTERS