State prepared to cover Enron customers if company defaults

By Jennifer Coleman Associated Press Writer
Wednesday December 05, 2001

SACRAMENTO – California power officials refused last week to help Enron Corp. line up power for their customers, citing credit concerns. 

“We were worried about credit,” said Pete Garris, acting deputy director of the state’s Department of Water Resources, at a Capitol briefing Tuesday. 

The turnaround marks how far the state has come since a year ago, when generators refused to sell energy to California utilities for the same reason, said Power Authority Chairman S. David Freeman. 

State power officials are preparing to cover up to 1,200 megawatts of energy that Enron supplies within California. Among Enron’s direct access customers are the University of California and California State University systems. 

Enron, which had revenues of $100.8 billion in 2000, filed for bankruptcy Sunday after a dizzying fall triggered by revelations of questionable partnerships, four years of overstated profits and then a failed merger with rival Dynegy. 

If Enron defaults on its direct access customers, state power officials will find a way to provide seamless electrical service to its customers, Garris said. DWR is prepared to supply the 800 to 1,200 megawatts of direct-access service to Enron customers. 

An Enron spokeswoman didn’t immediately return a call seeking comment. 

Enron sold some customers on thinking they would get cheaper power, Freeman said, and now may not deliver it. The company has sent letters “telling some customers they may not supply them.” 

In September, the Public Utilities Commission banned direct access, which lets customers bypass a utility and contract for power from an energy marketer, such as Enron. 

The PUC’s three-month delay in banning direct access let many customers defect from utilities and sign on with Enron and other providers. 

That meant fewer customers remained to pay off the debts the state built buying power at high wholesale rates and selling to customers, including those who later signed up for direct access, under capped rates. 

An Enron defaults, Freeman said, could send those customers back to the utilities, which would help the state pay that debt. 

UC spokesman Charles McFadden said the system was watching the Enron situation and officials were talking with the company “almost constantly.” 

“We have gotten a ’dear customer’ letter from Enron,” he said. “We’re not going to let the lights go out at UC.” 

Freeman said even increasing the CSU and UC price by one cent per kilowatt hour would add an additional $12 million to their bills each year. 

But McFadden said the universities had saved “tens of millions of dollars by having the direct-access contracts with Enron over past three plus years.” 

The state has been buying power for customers of three utilities since January. The utilities, Southern California Edison, Pacific Gas and Electric Co., and San Diego Gas & Electric Co., had amassed billions in debts due to high wholesale costs they couldn’t pass on to customers. 

Some energy providers, fearful that they wouldn’t be paid, refused to sell to California, or added credit premiums to the price for electricity, driving prices even higher. 

Enron, which has no power plants in California, has been a good customer for the California Independent System Operator, which operates much of the state’s electrical grid, said spokesman Gregg Fishman.