----- Forwarded by Jeff Dasovich/NA/Enron on 03/13/2001 10:05 AM -----

	"Ronald Carroll" <rcarroll@bracepatt.com>
	03/13/2001 08:50 AM
		 
		 To: <gfergus@brobeck.com>, <jdasovic@enron.com>, <jhartso@enron.com>, 
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		 Subject: Fwd: Colleges Sue Enron for Pulling Power Plug


----- Message from "Tracey Bradley" <tbradley@bracepatt.com> on Tue, 13 Mar 
2001 08:01:23 -0600 -----
To:	"Andrea Settanni" <asettanni@bracepatt.com>, "Charles Ingebretson" 
<cingebretson@bracepatt.com>, "Charles Shoneman" <cshoneman@bracepatt.com>, 
"Deanna King" <dking@bracepatt.com>, "Jeffrey Watkiss" 
<dwatkiss@bracepatt.com>, "Gene Godley" <ggodley@bracepatt.com>, "Kimberly 
Curry" <kcurry@bracepatt.com>, "Michael Pate" <mpate@bracepatt.com>, "Paul 
Fox" <pfox@bracepatt.com>, "Ronald Carroll" <rcarroll@bracepatt.com>, 
"Randall Rich" <rrich@bracepatt.com>
Subject:	Colleges Sue Enron for Pulling Power Plug
FYI

Colleges Sue Enron for Pulling Power Plug / UC, CSU Say Firm Plans Resale at 
Higher Price 
( March 13, 2001 ) 


The University of California and the California State University system are 
accusing energy giant Enron of breaking contracts to provide low-cost 
electricity to state campuses so the company can sell the power at higher 
prices on the spot market. 

      The two university systems are asking a federal judge to block the 
Houston-based energy broker from abandoning four-year contracts. Those 
contracts guaranteed the universities a reliable supply of power at prices 5 
percent below the capped rate created under the state's 1996 deregulation 
law. 

      The schools say Enron Energy Systems Inc., which promised them 
protection from the uncertainties of California's deregulation, is now trying 
to force them to rely on Pacific Gas and Electric Co. and Southern California 
Edison -- the two utilities nearly bankrupted by skyrocketing electricity 
prices. 

      Enron says the universities will still be guaranteed the price provided 
in the contracts until the deals run out in March 2002. But at least some of 
the electricity will now have to be purchased for the campuses by the state 
Department of Water Resources on the expensive spot market. 

      Prices on the short-term market can be many times greater than prices 
in long-term deals like those between Enron and the universities. The state 
or utilities, which cannot charge customers the full cost of electricity 
because of the rate cap, would be liable for the difference between the 
current utility rate and the spot market cost. 

      The state, which stepped in as buyer of power in January after the 
debt-ridden utilities defaulted on payments to power plants, has already 
spent $3.2 billion buying electricity for utility customers. If Enron gets 
out of its contracts with UC and CSU, the state also would have to buy as 
much as 450 megawatts for the two universities. That's enough to power 
450,000 homes. 

      In a civil complaint filed Friday in federal court in Oakland, the 
universities contend that Enron wants to be free to take advantage of soaring 
market prices for electricity by reselling low-cost power it controls under 
contracts originally meant to serve the college campuses. 

      "Enron is seeking to capitalize on the energy crisis to reap enormous 
profits," the civil suit alleges. 

      Enron spokeswoman Peggy Mahoney denied the accusation. 

      "We do not have any power purchased in blocks," Mahoney said. "It is 
fundamentally not true." 

      Nettie Hoge, executive director of the Utility Reform Network in San 
Francisco, called the move by Enron "outrageous." 

      "These people have been gouging us and making profits," she said. "If 
they are making less on some long-term contracts, they should stay with it." 

      Marty Sunde, vice chairman of Enron Energy Services, said he was 
"shocked" by the lawsuit and believes it is driven by fear of the unknown. 

      "We absolutely, positively are honoring our contract," Sunde said. 
"(The universities) have a 5 percent discount off the frozen tariff rate." 

      Mahoney said Enron will continue to honor other terms of the contracts 
by providing billing and advice on how the colleges can minimize their energy 
use. 

      But Eric Behrens, an attorney for UC, said Enron cannot fulfill those 
parts of the contracts because it has asked the utilities to rip out 
thousands of meters that provided information to the company about 
electricity use on the campuses. The utilities are installing their own 
meters at the schools. 

      Behrens said UC, one of the largest single users of electricity in the 
state, went through a laborious process to shift onto Enron's system, 
spending $1,500 for each of the 2,000 new meters. 

      Even if Enron honors the low rate until the contracts expire, Behrens 
said, its abrogation of the deals could expose UC and CSU to extra costs of 
as much as $297 million in coming years by forcing them to become utility 
customers again. 

      Those customers will probably have to cover a major share of the 
billions in debt that the utilities and the state have racked up over the 
past year as wholesale prices for power went through the roof. 

      Until Feb. 1, when Enron took steps to drop them, the universities were 
so-called direct access customers of Enron. Direct access, a key piece of the 
state's deregulation plan, was originally intended to lower prices for 
consumers by allowing companies to compete with the utilities. 

      But the state Legislature, concerned that too many customers were 
fleeing the utilities, recently passed a bill that could suspend any new 
contracts under the direct access program. 

      Mahoney said Enron is being forced to release all its direct access 
customers because the debt-laden utilities have stopped paying Enron and 
other providers a required rebate. 

      Other residential and institutional customers also are being returned 
to the utilities. Enron, for example, is returning the San Francisco Giants 
to PG&E even though the energy company signed a contract to provide 
electricity to Pacific Bell Park through 2010.
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