Enron Told It Can’t Sell Power in State

California’s grid operator on Tuesday kicked Enron Corp. out of the state’s energy market -- not because of allegations of market manipulation, but because the former energy trading giant refused to post more collateral to cover potential damages from meter-reading errors.

The move by the California Independent System Operator is largely symbolic because Enron, which filed for bankruptcy protection in December 2001, no longer supplies electricity to California. It last traded power in the state on Jan. 31.

“We don’t feel any California consumers are at risk of not having electricity service as a result of this action,” Cal-ISO spokeswoman Stephanie McCorkle said.

But Enron still was technically a participant in the California market and is being expelled because it would not comply with Cal-ISO collateral requirements.

Two of Enron’s top electricity traders have pleaded guilty to federal wire-fraud conspiracy charges in connection with their attempts to manipulate California’s power market.

Enron, however, is losing the ability to trade in California because it may have underpaid Cal-ISO as much as $50 million and will not post additional collateral to cover potential shortfalls, said Randy Abernathy, Cal-ISO vice president of market services.

Cal-ISO wants Enron to put up an additional $15 million to supplement the $18 million it already has posted in collateral.

Enron in late December notified Cal-ISO that a company Enron hired to read its customer meters had discovered errors dating to June 2001. Enron estimated that the errors by Computer Sciences Corp. of El Segundo resulted in underpayment to Cal-ISO of between $15 million and $50 million.

Enron, however, “cannot justify to Bankruptcy Court and to our creditors the posting of additional collateral when we do not know the amount of the under-collection,” company spokeswoman Karen Denne said.

Enron lawyer Richard Sanders, in a letter Feb. 4 to Cal-ISO, said the company “is committed to resolving the meter data error issue as soon as possible.” Enron has hired a consulting firm to sample the numerous meter-reading errors to better estimate Enron’s liability.

Computer Sciences said its own investigation into the meter reading problem was continuing.

If Enron is unable to pay what it owes Cal-ISO, the amount would be spread among other market participants, who “have the option to pursue legal remedies,” Abernathy said.

Abernathy added that Cal-ISO has reported Enron’s actions to federal utility regulators and to the state attorney general’s office because “we are concerned they have not been dealing with us in good faith.”

He noted that Cal-ISO has not had similar problems with other Computer Sciences customers.

“At this point, it doesn’t seem to be a problem for anyone other than Enron,” Abernathy said.

Enron in December said that Computer Sciences’ mistakes included failing to read some customer meters and reading other meters monthly instead of daily or even more frequently.

Computer Sciences also reported inconsistencies in data used for billing customers, Enron said.