Snohomish utility doesn't have to pay Enron $120 million

SEATTLE – The Snohomish County Public Utility District does not have to pay more than $120 million for canceling its contract with the bankrupt energy giant Enron Corp., federal regulators declared Wednesday.

The Federal Energy Regulatory Commission said in a news release that it was denying Enron's claim because the company's "financial fraud induced Snohomish to enter into the contract."

The decision apparently ends a lengthy struggle by the small public utility that helped reveal the extent of Enron's misdeeds. It was the Snohomish PUD that uncovered and transcribed profanity-laced audiotapes of Enron traders gleefully conspiring to steal money from "those poor grandmothers" in California during the energy crunch of 2000-01.

"This is fantastic news and a huge victory for consumers in Snohomish County and our utility," said Mike Gianunzio, the utility's general counsel. "We've been battling with Enron since late 2001 and it's taken almost five years and hundreds of thousands of pages of evidence and lots of hard work. We've got a victory."

Gianunzio said Enron could appeal the FERC decision, likely to a U.S. Circuit Court of Appeals. He said the utility has heard nothing from Enron as to whether it plans to do so.

Enron has previously declined to comment on the Snohomish PUD case. A spokeswoman did not immediately reply Wednesday to an Associated Press e-mail request for comment.

In its ruling, FERC "is saying there's enough evidence they could make a finding without having to go through a trial before one of their administrative law judges," Gianunzio said.

"All this time, Snohomish County ratepayers have had a big $120 million bill hanging over their head," Sen. Maria Cantwell, D-Wash., said Wednesday. "To finally get relief, it's a great victory."

As a Western drought and California's deregulation plan drove energy prices sky-high, Snohomish in 2001 entered into a nine-year contract with Enron to buy power at $109 per megawatt hour, more than four times as much as the utility had been accustomed to paying for such contracts. Customers, including Cantwell, saw their rates increase drastically.

Gianunzio said the utility, which now serves 300,000 customers, had a provision in its contract that provided it could cancel if Enron was financially unstable. After learning of Enron's worsening condition in late 2001, the utility did so, he said, shortly before Enron filed for bankruptcy protection.

Snohomish officials expected federal regulators to jump to their defense, and were frustrated at what they perceived as foot-dragging or outright opposition instead. FERC officials initially opposed the PUD's attempts to get access to the audiotapes and other evidence.

"Their audiotapes became a path for helping to explain the books and the schemes," Cantwell said. "It was incredible investigative and legal work by a little utility."

In addition to the audiotapes, Snohomish went on to search Enron accounting sheets, documenting that Enron gouged Western customers for $1.1 billion during the crunch. In one instance, Enron pocketed $222,000 in three hours by shipping power from California into Oregon, and then back to California at wildly inflated prices. Blackouts were rolling across California at the time.

Enron also agreed this week to pay $3.3 million to settle claims it overcharged Tacoma Power during the 2000-01 energy crunch, but the city-owned utility would actually receive much less if the settlement is approved. A bankruptcy court is distributing money for these types of claims at a rate of 23 cents on the dollar.

In addition, FERC announced settlements between Enron and commission trial staff; Valley Electric Association, a Nevada electric cooperative; the city of Santa Clara, Calif.; and the Metropolitan Water District of Southern California.

U.S. Rep. Jay Inslee, D-Wash., whose district includes southern Snohomish County, also welcomed FERC's action, saying it reflected a spending bill amendment passed unanimously by the House last month.

His amendment, though not yet law, would prohibit FERC from using any money to enforce termination-payment claims such as those made by Enron.

"Basically, the thrust of the amendment was the House of Representatives stating in unequivocal language that Enron should not be able to proceed with victimizing the ratepayers of Washington any longer," he said.

"It's like Bonnie and Clyde asking for a refund from a bank they just robbed."