Final Energy Bill Scores a Victory for Consumers Over Enron & its Lobbyists

Cantwell provision to become law: Will bar bankruptcy court from enforcing Snohomish PUD’s $122 million Enron contract

WASHINGTON, D.C. – An energy bill is on its way to the President’s desk – and it contains a big win for Snohomish County ratepayers. The Energy Policy Act of 2005 (HR 6), which passed the Senate today, contains U.S. Senator Maria Cantwell’s (D-WA) provision to prevent a bankruptcy court from forcing Snohomish Public Utility District (PUD) and its customers to fork over another $122 million to Enron.

The Cantwell provision prohibits a bankruptcy court from enforcing payments on power contracts that are unjust, unreasonable or contrary to the public interest. The provision was written to target manipulated power contracts between Enron and utilities such as Washington state’s Snohomish PUD and others in the West. 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.

"If Enron has their way, they would have hiked Snohomish energy rates 25 percent to line their pockets," said Cantwell, a member of the Senate Energy Committee. "Today we stopped them cold."

Cantwell added the "Enron relief" provision to the Senate’s version of energy legislation, passed last month. However, Enron hired a lobbyist in an effort to have Cantwell’s provision stripped from the energy bill. During conference negotiations on the bill earlier this week, the Senate overcame initial resistance from the House, which last week refused to accept the provision.

The Cantwell provision was defended vigorously in by a bipartisan group of Senate conferees, led by Energy Committee Chairman Pete Domenici (R-NM) and Ranking Member Jeff Bingaman (D-NM). Members of the Washington state delegation in the House of Representatives also voiced unanimous support for the measure.

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 Court went so far as to enjoin FERC from proceeding with its own specific inquiry into whether Enron is owed the termination payments in those cases.

Meanwhile, 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."

The Enron contract issues with Snohomish PUD go to trial at FERC later this year. A ruling on that trial is expected in early 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.