By The Hill Staff - 07/19/05 12:00 AM EDT
In its freewheeling heyday, Enron spent far more than a $1 million each year on its well-heeled K Street lobbying team, keeping on retainer as many as 13 firms paid to track more than 70 pieces of legislation and issues.
Now bankrupt, the company exists only to manage the sale of its own assets.
But one more lobbying fight remains: a provision in the Senate energy bill that could cost Enron’s creditors hundreds of millions of dollars.
Weil, Gotshal and Manges — the law firm handling Enron’s bankruptcy — registered to lobby for the company after Sen. Maria Cantwell (D-Wash.) successfully added a provision to the Senate energy bill that prohibits the U.S. Bankruptcy Court in New York from collecting hundreds of millions of dollars in contract-termination fees if a federal panel determines the controls to be “unjust” or “unreasonable.”
The Cantwell provision could effectively empower the Federal Energy Regulatory Commission to decide if Enron’s claim to nearly half a billion dollars in termination fees is valid.
“FERC is the federal regulatory institution that is supposed to make a determination whether power contracts are just and reasonable,” said Angela Becker-Dippmann, Cantwell’s press secretary. “That’s its job.”
But Robert Odle, a former assistant secretary at the Energy Department during the Reagan administration who is now a lobbyist at Weil, Gotshal, said the decision about the termination fees should be left to the court.
“What’s happening here is a senator said she wants money that otherwise would go to Enron’s creditors to go to utilities in her state and other states,” Odle said.
“Congress shouldn’t be picking winners and losers.”
At issue are contracts Enron held with several utilities in Washington, Nevada and California to deliver power. Some of the utilities terminated their contracts with Enron as the Houston-based company slid toward bankruptcy, undone by massive accounting fraud. In other cases, Enron was the one to terminate the contracts.
Enron then sued to collect termination fees, which in the case of one utility in Washington total $122 million.
Utilities in Santa Clara and Palo Alto, Calif., and Nevada also face termination costs.
The court initially backed Enron’s claim, determining that two Nevada utilities, Sierra Pacific Power Co. and Nevada Power co. — both subsidiaries of Sierra Pacific Resources — owe Enron’s creditors $330 million. Another judge empowered to review the court’s decision invalidated that ruling, sending it back to bankruptcy court for review.
The company has hired several lobbying firms, including Manatt, Phelps & Phillips, to help build support for Cantwell’s provision.
The utilities argue that the contracts were based in part on fraud Enron’s traders committed in Western energy markets, trading tricks referred to in taped conversations as Fat Boy and Death Star. The schemes drove up prices, they argue.
To what extent that market manipulation sent energy prices skyrocketing in Western markets during 2000-’01 is the subject of some disagreement. Other factors include a drought in the Northwest, which limited power supplies from hydro plants, and an antiquated transmission system in California.
The House bill does not include language similar to the Senate’s measure — one difference among dozens that conference committee negotiators must resolve if they are to send a bill to the president.
Energy conference discussions continue today in a scheduled mark-up of six sections of the energy bill. Congressional aides expect the Enron provision to be discussed at Thursday’s meeting.
Enron agreed on Friday to pay $1.52 billion to settle claims against it stemming from its role in the energy crisis. The money would be paid to utilities in California and the states of Washington and Oregon.
Becker-Dippmann said the settlement wouldn’t be paid to the utilities now lobbying in support of the Cantwell provision.
It isn’t clear how much of the $1.52 billion will actually be paid, as a long list of creditors tries to recoup some portion of their money. But the Senate energy bill may affect the size of the pool of money available for creditors haggling for a share of it.
The $122 million in termination fees the Snohomish Public Utility District (PUD) would face is roughly 20 percent of its annual operating budget, said Al Aldrich, the government affairs director for the utility.
He said power rates have increased 50 percent as a result of the crisis in 2000.
“Our customers have paid dearly over the last five years,” Aldrich said.
The plucky utility has been at the forefront in the fight to uncover trading manipulation by Enron’s trader. The utility hired a team, for example, to transcribe recorded conversations of energy traders at Enron.
These conversations included mocking discussions about the effect the trading schemes would have on “Grandma Millie” and other ratepayers.
Snohomish PUD has hired McBee Strategic Consulting, founded by Steve McBee, a former top staffer to Rep. Norm Dicks (D-Wash.), to lobby in support of the Cantwell provision. (See McBee profile, Page 20.)