NEWS: uc/csu lawsuit

----- Forwarded by Jeff Dasovich/NA/Enron on 03/13/2001 10:55 AM -----

Jennifer Rudolph@EES
03/13/2001 10:52 AM

To: CA Team
cc:
Subject: LA Times Press on uc/csu lawsuit

LA Times
Today

Tuesday, March 13, 2001
UC, Cal State Systems Sue Power Seller to Retain Pact's Low Prices

Electricity: Officials want to prevent Enron from switching their accounts to
Edison and PG&E. They fear losing discounted rates.
By MASSIE RITSCH, Times Staff Writer

Faced with losing their protection from sky-high electricity bills, the
University of California and California State University have sued to stop
their power supplier from halting service.
The UC and Cal State systems signed a four-year contract with Enron Energy
Services in 1998, locking into discounted fixed rates for electricity from
the Houston-based energy giant.
Last month, Enron notified its commercial and industrial customers in
California, including the universities, that their power would be supplied by
Pacific Gas & Electric and Southern California Edison.
Because of the complicated rules of the state's deregulated utility market,
the shift saves Enron money, but the universities fear that it could subject
them to the fluctuating--but always expensive--prices that most Californians
have been paying recently for power.
UC and Cal State accuse Enron of breaking its contract so that it can sell
power earmarked for the campuses to other customers for more money.
On Friday, the public universities asked the U.S. District Court in Oakland
to issue a preliminary injunction to stop the switch-over. No hearing has
been scheduled, UC spokesman Charles McFadden said.
"We don't object to Enron making more money," McFadden said. "What we do
object to is Enron seeking to increase their profits at the expense of
California's students, parents and taxpayers."
Enron denied Monday that the company will resell power to boost profits, and
an executive guaranteed that, for this final year of its contract with the
universities, Enron will reimburse them for any increase in their power bills
when they return to the customer rolls of PG&E and Edison.
"All the value that caused the [UC and Cal State systems] to want a contract
with us, we are retaining. . . . The only reason we did [this] is because we
found a better cost alternative to keep us in the game," Enron Vice Chairman
Marty Sunde said.
The universities estimate that their contract with Enron has saved their
campuses $30 million. Being returned to the in-state power suppliers could
cost them an additional $132 million to $297 million over 10 years, they say.
That figure includes the cost of switching meters on the campuses and
changing billing systems. More significant, the higher price the universities
would pay for power would include a projected rate increase that would help
PG&E and Edison reduce the billions in debt they have incurred in
California's deregulated electricity market.
While other colleges in the state pay super high rates for power, UC, Cal
State and Enron have proudly promoted their arrangement. In January, the
university systems put out a news release that extolled the contract and
assured that electricity rates would remain stable until at least March 31,
2002, when the contract was scheduled to expire.
When the agreement was reached in 1998, Enron said it was "honored" to serve
UC and Cal State, and the firm boasts on its Web site that the university
systems are "notable customers."
"We were and are proud of the contract," UC's McFadden said. "That's why
we're fighting so hard to preserve it."
UC and Cal State are among the state's biggest consumers of electricity,
paying more than $125 million annually for power. Both systems meet a portion
of their power needs by generating electricity at on-campus plants.
Not all of the universities' campuses have been served by Enron. UCLA, for
example, buys its power from the Los Angeles Department of Water and Power,
and UC Riverside purchases it from the city of Riverside.