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Proof Enron Bilked PUD

by Lukas Velush, Herald Writer
Everett Herald, Wash., June 5, 2004

Transcripts show traders for the former energy giant bragged about price gouging.


That sound you just heard was Enron slapping you in the face.

Snohomish County PUD has been a national media darling all week for releasing transcripts that show how Enron Corp., the bankrupt energy broker, gleefully and crudely bragged about gouging millions of dollars out of the pockets of West Coast grandmothers during the 2000-2001 energy crisis.

The lies hit home in Snohomish County on Friday, when The Herald received copies of a transcript that shows Enron's deception directly affected the PUD's 290,000 customers.

In the transcript, Enron traders admit to intentionally manipulating the price of electricity it sold to the PUD.

The PUD's electricity rates shot up 50 percent in 2001 after it bought high-priced power from Enron. Rates haven't come down since then and are still among the highest in the state.

Disconnections at the utility have been at record levels since the rate hike, as customers struggle to keep up with their high bills.

The PUD signed the Enron contract at a time when electricity prices were spiraling out of control. It ended up paying $200 million for nine years of electricity at $109 per megawatt hour, a previously unheard of price.

The proof that it was bilked?

Two Enron traders had this exchange in the days leading up to the PUD sale:

One broker tells the other to make Snohomish County PUD officials believe that Enron has competition for the power it's selling, but that the PUD is on Enron's "short list" of possible customers.

"Make it sound like we're in a competitive process," the first broker says.

"OK," says the other.

"(Ask) who have other (utilities) been talking to, or some (expletive) like that," the first broker continues.

The second broker laughs.

First broker again: "It's all how well you can weave these lies together."

The other broker responds: "I feel like I'm being corrupted now."

"No, this is marketing," is the response. "It's not as bad as trading."

"OK, cool, I'll do it," the second broker says.

PUD officials believe that conversation is enough evidence that they shouldn't have to pay Enron $122 million, money Enron says the PUD owes it for canceling its contract in late 2001, just before Enron filed for bankruptcy.

"It's absurd and unconscionable that Enron or its creditors want to get another dime out of us," said Mike Gianunzio, the PUD's general counsel.

Gianunzio said the PUD asked the U.S. Department of Justice for Enron's energy crisis transcripts so it could get the proof it needs to toss out a $122 million lawsuit Enron filed against the PUD.

The PUD has been setting money aside in case it loses the lawsuit, but Gianunzio declined to say how much for fear of affecting possible future negotiations.

The PUD canceled the contract before Enron filed for bankruptcy to avoid getting involved in what has become the nation's largest bankruptcy. Gianunzio said the contract allowed the PUD to cancel if Enron's "financial situation deteriorates."

The PUD also hopes the transcripts will convince regulators that Enron should refund the profits it made from manipulating the PUD.

The PUD paid into its Enron contract for eight months, for a total of $16 million.

Gianunzio estimates that at least 60 percent of that was artificially inflated, which, if true, means Enron owes the PUD about $10 million.

However, because Enron owes its creditors so much money, it's unlikely the PUD would get all or any of that money.

The PUD mainly wants to make sure it doesn't have to pay Enron any more money, Gianunzio said.

The Bonneville Power Administration, the PUD's largest energy supplier, also bought electricity from Enron, but it's unclear if it would get any refunds because it negotiated a settlement of its contracts with Enron.

Enron officials did not return a call asking for comment.

The PUD filed the now famous transcripts with the Federal Energy Regulatory Commission in May, adding the documents to a case the PUD and dozens of other utilities have against Enron and other utilities for allegedly manipulating the market during the crisis.

Agency spokesman Bryan Lee said the documents are now part of the case's legal record.

"It's understandable that folks want justice in the Pacific Northwest," Lee said. "Unfortunately, due process takes time."

At the request of several California utilities, the case may be delayed by several months.

Lukas Velush, Herald Writer
Proof Enron Bilked PUD
The Herald of Everett, Wash., June 5, 2004

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