Fwd: Enron accused of stiffing universities

---------------------- Forwarded by Chris H Foster/HOU/ECT on 03/15/2001
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Enron Capital & Trade Resources Corp.

From: Holli Krebs 03/15/2001 01:03 PM

To: Paul Choi/SF/ECT@ECT, Stewart Rosman/HOU/ECT@ECT, Chris H
Foster/HOU/ECT@ECT
cc:
Subject: Fwd: Enron accused of stiffing universities

---------------------- Forwarded by Holli Krebs/HOU/ECT on 03/15/2001 03:15
PM ---------------------------

Enron Capital & Trade Resources Corp.

From: "Bert I DUNN" <Bert.Dunn@EWEB.Eugene.OR.US<
03/15/2001 10:30 AM

To: <hkrebs@ect.enron.com<
cc:
Subject: Fwd: Enron accused of stiffing universities

Date: Tue, 13 Mar 2001 09:32:22 -0800
From: "Jim G MALONEY" <Jim.Maloney@EWEB.Eugene.OR.US<
To: <lhenry@e-z.net<,"Bert I DUNN" <Bert.Dunn@EWEB.Eugene.OR.US<, "Bill P
WELCH" <Bill.Welch@EWEB.Eugene.OR.US<, "Bob M LORENZEN"
<Bob.Lorenzen@EWEB.Eugene.OR.US<, "Brenda J SIROIS"
<Brenda.Sirois@EWEB.Eugene.OR.US<, "Dave KOSKI"
<Dave.Koski@EWEB.Eugene.OR.US<, "Dean H AHLSTEN"
<Dean.Ahlsten@EWEB.Eugene.OR.US<, "Dick D VARNER"
<Dick.Varner@EWEB.Eugene.OR.US<, "Eric M HIAASEN"
<Eric.Hiaasen@EWEB.Eugene.OR.US<, "Gale H BANRY"
<Gale.Banry@EWEB.Eugene.OR.US<, "Jim G MALONEY"
<Jim.Maloney@EWEB.Eugene.OR.US<, "Jim WILEY" <Jim.Wiley@EWEB.Eugene.or.us<,
"John C MITCHELL" <John.Mitchell@EWEB.Eugene.OR.US<, "John A YANOV"
<John.Yanov@EWEB.Eugene.OR.US<, "Ken D BEESON"
<Ken.Beeson@EWEB.Eugene.OR.US<, "Mat NORTHWAY"
<Mat.Northway@EWEB.Eugene.OR.US<, "Mike J LOGAN"
<Mike.Logan@EWEB.Eugene.OR.US<, "Peter BARTEL"
<Peter.Bartel@EWEB.Eugene.OR.US<, "Randy L BERGGREN"
<Randy.Berggren@EWEB.Eugene.OR.US<, "Rob M ROY" <Rob.Roy@EWEB.Eugene.OR.US<,
"Scott C SPETTEL" <Scott.Spettel@EWEB.Eugene.OR.US<
Subject: Enron accused of stiffing universities
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Colleges Sue Enron For Pulling Power Plug
UC, CSU say firm plans resale at higher price
Bernadette Tansey, Tanya Schevitz, Chronicle Staff Writers
Tuesday, March 13, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/13/M
N140239.DTL
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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