Bonneville Terminates Enron Contracts, Saves $40 Millionby CBB Staff
Columbia Basin Bulletin - May 2, 2003
The Bonneville Power Administration has reached an agreement with representatives of Enron's creditors terminating all remaining contracts with the bankrupt company.
BPA estimates the action will reduce a proposed 15 percent wholesale rate increase by about 2 percent.
The agreement saves more than $40 million for Northwest ratepayers, a discount of 30 percent off of the market value of the contracts. Under the agreement approved by the bankruptcy court, BPA pays Enron's creditors $99 million.
The agreement also resolves legal uncertainty about other Enron contracts BPA unilaterally terminated early in 2002. Those terminations saved ratepayers approximately $150 million, which is already figured into BPA's rates.
"We were able to negotiate a very beneficial settlement for ratepayers," said BPA Administrator Steve Wright. "The agreement avoids high legal costs and unpredictable rulings by regulators and the courts. It's a significant step among our efforts to reduce costs and provide certainty at a moment when the Northwest economy needs it most."
Wright said he particularly wanted to thank Senators Ron Wyden, D-Ore., and Maria Cantwell, D-Wash., for their pursuit of a resolution of Enron bankruptcy issues in a way favorable to Pacific Northwest consumers. "Their strong support in this matter put us in a better position to negotiate the agreement," he said.
BPA's portfolio of business with Enron dates back to 1998 when the company was a major market participant. In 2001, utility and industrial customers throughout the region placed an additional 3,000 average megawatts of demand on BPA under new five-year agreements. Lacking sufficient generation from the federal system, BPA met some of the need by entering into five-year contracts to buy power from marketers, including Enron.
BPA purchased about 300 average megawatts from Enron at an average price of about $52 per megawatt hour (MWh) to be delivered between 2003 and 2006. At the time, market prices ranged as high as $100 MWh. Prices today are a little above $35 MWh. After Enron filed for bankruptcy in 2001, the company continued to honor its BPA contracts by delivering power.
BPA will pay the settlement from a government fund that provides money for resolution of legal disputes. The agency will repay the fund over seven years.
Cantwell, who sits on the Senate Energy and Natural Resources Committee, has sought to terminate contracts between Enron and Northwest utilities, including BPA and others. "This is an important victory for Northwest ratepayers," Cantwell said. "Enron robbed the Northwest during the energy crisis and we are finally beginning to get out of these over-inflated deals. But our fight is not over - there are still contracts between Enron and Northwest utilities that must be terminated by FERC.
"While I'm pleased with these savings, BPA and the Northwest as a whole must remain committed to finding creative ways to cut costs and reduce rates," Cantwell said.
The senator said Washington state ratepayers continue to bear the burden of long-term contracts with Enron. Both the Snohomish Public Utilities District and PacifiCorp have filed petitions with FERC for relief under sections 205 and 206 of the FPA from long-term contracts with Enron.
Wyden said he was "pleased we were able to convince BPA to get out of these overpriced contracts with Enron. BPA has now done the right thing with regard to reducing these costs and I hope they find other cost savings for Northwest ratepayers."
In January 2002, Wyden was the first Senator to formally ask FERC Chairman Wood to investigate Enron's manipulation of the Northwest energy market. At a hearing of the Senate Energy Committee, Wyden also raised the issue of Enron's market manipulation and its direct impact on Northwest ratepayers, saying "The testimony indicates that following Enron's bankruptcy, right at the time of filing, the forward markets on the West Coast dropped by 30 percent. There were no other changes on the West Coast, no changes in hydro supply, fossil fuel prices. People were in the dark, and I am not sure that the country can conclude that Enron was not manipulating the energy markets on the West Coast."
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