UC, Cal State Systems Sue Power Seller to Retain Pact's Low Prices

Tuesday, March 13, 2001

UC, Cal State Systems Sue Power Seller to Retain Pact's Low Prices
Officials want to prevent Enron from switching their accounts to Edison and PG&E. They fear losing discounted rates.

By MASSIE RITSCH

     Faced with losing their protection from sky-high electricity bills, the University of California and California State University have sued to stop their power supplier from halting service.
     The UC and Cal State systems signed a four-year contract with Enron Energy Services in 1998, locking into discounted fixed rates for electricity from the Houston-based energy giant.
     Last month, Enron notified its commercial and industrial customers in California, including the universities, that their power would be supplied by Pacific Gas & Electric and Southern California Edison.
     Because of the complicated rules of the state's deregulated utility market, the shift saves Enron money, but the universities fear that it could subject them to the fluctuating--but always expensive--prices that most Californians have been paying recently for power.
     UC and Cal State accuse Enron of breaking its contract so that it can sell power earmarked for the campuses to other customers for more money.
     On Friday, the public universities asked the U.S. District Court in Oakland to issue a preliminary injunction to stop the switch-over. No hearing has been scheduled, UC spokesman Charles McFadden said.
     "We don't object to Enron making more money," McFadden said. "What we do object to is Enron seeking to increase their profits at the expense of California's students, parents and taxpayers."
     Enron denied Monday that the company will resell power to boost profits, and an executive guaranteed that, for this final year of its contract with the universities, Enron will reimburse them for any increase in their power bills when they return to the customer rolls of PG&E and Edison.
     "All the value that caused the [UC and Cal State systems] to want a contract with us, we are retaining. . . . The only reason we did [this] is because we found a better cost alternative to keep us in the game," Enron Vice Chairman Marty Sunde said.
     The universities estimate that their contract with Enron has saved their campuses $30 million. Being returned to the in-state power suppliers could cost them an additional $132 million to $297 million over 10 years, they say.
     That figure includes the cost of switching meters on the campuses and changing billing systems. More significant, the higher price the universities would pay for power would include a projected rate increase that would help PG&E and Edison reduce the billions in debt they have incurred in California's deregulated electricity market.
     While other colleges in the state pay super high rates for power, UC, Cal State and Enron have proudly promoted their arrangement. In January, the university systems put out a news release that extolled the contract and assured that electricity rates would remain stable until at least March 31, 2002, when the contract was scheduled to expire.
     When the agreement was reached in 1998, Enron said it was "honored" to serve UC and Cal State, and the firm boasts on its Web site that the university systems are "notable customers."
     "We were and are proud of the contract," UC's McFadden said. "That's why we're fighting so hard to preserve it."
     UC and Cal State are among the state's biggest consumers of electricity, paying more than $125 million annually for power. Both systems meet a portion of their power needs by generating electricity at on-campus plants.
     Not all of the universities' campuses have been served by Enron. UCLA, for example, buys its power from the Los Angeles Department of Water and Power, and UC Riverside purchases it from the city of Riverside.