Settlement reached between UC, Enron

By Timothy Kudo
Daily Bruin Senior Staff

The University of California and California State University
will receive their power from Enron Energy Services until their
current contract expires in 2002 due to a settlement reached
between the three parties last week.

After 2002, the universities have committed themselves to a
two-year extension of the contract, according to the settlement
which was announced July 11.

The agreement covers all UC campuses except UCLA and UC
Riverside which receive their power through local providers such as
the Los Angeles Department of Water and Power.

The universities brought Enron to court after the company
transferred energy providing services to Southern California Edison
and Pacific Gas & Electric utility companies, which have been
troubled by financial problems caused by the state energy
crises.

Though the UC would not have paid more under the switch,
officials opposed it because of the “shaky” situation
of the utilities and the costs associated with changes in
accounting and measuring electricity, said UC spokesman Chuck
McFadden.

The universities alleged that Enron handed off the power
supplying duties to the utilities to make money by stockpiling
energy and selling it at high prices, McFadden said.

Enron was contractually committed to selling energy to the
universities at a low price despite skyrocketing prices caused by
the deregulation of the power industry, he continued.

“If you were a Houston electrical power broker and you had
a contract to supply electricity to the UC and you were selling it
to make your profit, toddling along, and all of a sudden the
(market) goes skyrocketing and you have all this electricity, what
would you do?” McFadden said.

Enron denied the allegations.

“As we have said all along, we do not pre-purchase power
in California,” said Enron spokesman Peggy Mahoney.

The universities were joined in court by state Attorney General
Bill Lockyer on March 12 when they sought a preliminary injunction
against Enron to keep them as “direct access”
customers.

Lockyer joined the case because of the “significant
implications for the taxpayers of California,” said Nathan
Barankin, communications director for the attorney general.

The energy crisis has led the state to subsidize the utilities
operation to ensure the state is powered. Enron’s transfer of
service to those utilities was seen by the attorney general as
placing additional weight on the state budget.

“The contracts that Enron had entered into with the UC,
CSU and others were contracts that required them to provide power
at a rate significantly less than what they were selling it for at
the market price,” Barankin said. “By trying to renege
on their contract … Enron was hoping to make enormous profits at
the (expense) of taxpayers.”

Despite the legal wrangling and small monetary losses caused by
the switch, each side was satisfied with the agreement which will
keep UC paying for an additional two years.

“It was just a win-win for everybody,” said Ken
Swisher, CSU media relations manager.