Snohomish PUD to pay Enron $18 million to end litigation

The Snohomish County Public Utility District will pay Enron $18 million to end all litigation between the two companies in their five-year legal battle.

Enron had initially charged that it was due a $116 million early termination fee from the PUD and has been battling the Snohomish County utility for that money since the PUD ended a nine-year contract with the trader at the end of the West Coast energy crisis in 2001.

The PUD had maintained that it shouldn't have to pay any fee to Enron, as the now-bankrupt energy trader illegally manipulated energy markets to increase electricity costs.

Still, the PUD said an arbitration hearing scheduled to begin next week forced it to settle despite earlier indications it would be vindicated in court.

"If we lose, then we could be out as much as $180 million with interest on the termination payment," said one PUD official. "You never know how arbitration will go."

The PUD is paying about 10 cents on the dollar in the settlement, utility officials say, much better than other utilities have done in their settlements with Enron. The settlement will complete a legal battle that has been fought in U.S. District Court as well as before the Federal Energy Regulatory Commission.

The FERC, which initially supported Enron's arguments, eventually agreed with the PUD that it was not liable for the termination fee. FERC also has ordered Enron to disgorge profits from West Coast utility purchases.

This legal battle also has drawn increased interest in Congress, where Sen. Maria Cantwell, D-Wash., and others have rallied around the PUD, calling this a David-versus-Goliath case. An amendment introduced by Cantwell helped the FERC rule in favor of the PUD.

Enron likely will use the money to fend off creditors in bankruptcy court. Attempts to reach Enron officials by phone were unsuccessful Friday.

Christopher Schwarzen: 425-783-0577 or cschwarzen@seattletimes.com