Enron Reaches Settlements With Regulators, Utilities
Enron Corp. said Friday that it had reached settlements totaling more than $400 million on disputed electricity and natural gas transactions in the West from 1997 to 2003, including one in which the city of Santa Clara, Calif., will pay Enron.
The company said it settled with three parties: the Federal Energy Regulatory Commission’s trial staff, Santa Clara and its municipal utility, and Valley Electric Assn. Inc., a Nevada electricity cooperative.
Under the settlements, FERC will receive a $400-million penalty claim against subsidiary Enron Power Marketing Inc., the company said. FERC also will receive as much as $15 million in unsecured claims against Enron Power Marketing.
Santa Clara agreed to pay Enron creditors $36.5 million to resolve a lawsuit over terminated electricity contracts with the city’s municipal utility, the two parties said Friday.
Enron, the scandal-plagued power supplier that filed for bankruptcy protection in 2001, sued Santa Clara the next year, claiming officials owed it $147 million for terminating two electricity contracts ahead of schedule. Santa Clara stopped paying Enron in December 2001 after the company ceased delivering promised electricity, said Junona Jonas, utility director for Silicon Valley Power, the city-owned electricity utility.
Although Silicon Valley Power contended it was Enron that ended the contracts when it couldn’t deliver electricity, the utility settled to avoid further legal costs.
“We feel we had a strong case,” Jonas said. “We had to weigh it against the cost of continuing litigation.”
The settlement calls for Santa Clara to get an unsecured bankruptcy claim of $4 million. In bankruptcy, unsecured claims are among the last in line for payment -- after banks but before shareholders. Santa Clara spent $5 million fighting the suit, Jonas said.
Santa Clara ratepayers aren’t the first to pay Enron. In May, Palo Alto agreed to pay Enron $21.5 million as compensation for canceling two electricity and gas contracts.
“There are so many outrageous things that have gone on in the context of the Enron debacle that the ordinary rules of logic don’t seem to apply,” said Mike Florio, senior attorney at the Utility Reform Network, a consumer advocacy group.
In the wake of Enron’s bankruptcy, state attorneys general, utilities and state energy agencies in the West pressed claims against Enron, accusing it of manipulating power markets to inflate profit. In July, Enron Corp. agreed to a $1.5-billion settlement with parties that included attorneys general in California, Oregon and Washington and utilities in California and Nevada.
Under the Valley Electric deal, Enron will get $8 million to settle power contracts ended in 2002 and Valley Electric will get an unsecured bankruptcy claim of $14 million. The settlements are subject to approval by FERC and U.S. Bankruptcy Court.
