05.19.05

Cantwell Wins Measure to Prevent Enforcement of Manipulated Enron Contracts

Provision Would Bar Bankruptcy Court From Enforcing Snohomish PUD's $122 Million Enron Contract

WASHINGTON , D.C. – U.S. Senator Maria Cantwell (D-WA) today successfully added to new national energy legislation her amendment that will prevent a Bankruptcy Court from forcing Snohomish Public Utility District (PUD) and its customers to fork over another $122 million to Enron. After a vigorous, one-hour debate, Cantwell won the support of a majority of members of the Senate Energy Committee to add the measure to the bill, being marked-up in the committee this week.

"Ratepayers shouldn't be forced to reward criminal activity," said Cantwell, a member of the Senate Energy Committee. "This measure will ensure that consumers who have already been victimized by Enron's massive mugging won't become the deep pockets for its bankruptcy. This issue rises to such a level of outrageousness that it deserves this Committee's undivided attention."

The Cantwell amendment added today will prohibit the Bankruptcy Court from enforcing "unjust and unreasonable" power contracts. The provision was written to target dishonorable contracts between Enron and utilities such as Washington state's Snohomish PUD and other Western utilities. The contracts were cancelled when the energy giant began its slide into bankruptcy. But once they were cancelled, Enron turned around and sued utilities for "termination payments," seeking to collect profits on power that was never even delivered.

While the Federal Energy Regulatory Commission (FERC) has been conducting its proceedings to provide remedies for the consumers harmed by market manipulation, Enron has nevertheless continued pursuing collection of these "termination payments" in Bankruptcy Court. In fact, the Bankruptcy Court has already ruled that other Enron victims – Nevada Power Company and Sierra Pacific Power Company – should have to pay these fees, which come to more than $330 million for the two Nevada utilities.

The Cantwell amendment would prevent this from happening to Snohomish PUD, by ensuring that once FERC declares them void, they cannot be enforced.

Debate on the Cantwell amendment lasted about one hour during the Senate Energy Committee's mark-up today of the energy bill's electricity title. Once it became clear that Cantwell had secured the votes of all Democratic Senators as well as Sens. Gordon Smith (R-OR) and George Allen (R-VA), the Chairman agreed to accept her amendment on a voice vote.

Snohomish PUD and Cantwell earlier this year marked the biggest victory yet in the FERC case, when the Commission in March issued an order that found, for the first time, "the termination payments are based on profits Enron projected to receive under its long-term wholesale power contracts executed during the period when Enron was in violation of conditions of its market-based rate authority."

This month also marks three years since Enron's "smoking gun" memos were revealed, which first outlined the company's schemes to bilk Western ratepayers. Since then, the discovery of additional data, audiotapes and email evidence have added details to the breadth of Enron's market manipulation tactics. FERC has estimated that Enron's illegal activities cost Western consumers about $1.6 billion.

The measure was approved by voice vote.

Next steps in the battle between Enron and the Snohomish PUD

The Enron contract issues with Snohomish PUD go to trial at FERC in September 2005. A ruling on that trial is expected in January 2006. (The outcome of the trial is decided by a FERC administrative law judge.) If that ruling is appealed by either side, the full FERC (five commissioners) is expected to rule on the appeal in the summer of 2006.

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