Enron settles price-gouging claims
SACRAMENTO, Calif. — Bankrupt energy company Enron Corp. has agreed to pay $47.5 million in a settlement that could reach $1.5 billion to resolve claims that it gouged Washington, Oregon and California during the 2000-2001 energy crisis.
The settlement will end market manipulation and price gouging claims against the once high-flying Houston-based company, California Attorney General Bill Lockyer said Friday, but the exact amount could be considerably less than the settlement’s face value.
The agreement requires approval by the bankruptcy court and the Federal Energy Regulatory Commission. The final payment amounts will depend on what is left after Enron’s secured creditors are repaid as part of bankruptcy proceedings.
Besides the cash payment, Enron will provide Washington and Oregon with unsecured claims of $22.5 million each. California would be entitled to $875 million from that unsecured settlement.
“Enron used malicious tactics to illegally manipulate the energy market and get rich at the expense of Washington utility companies and residents,” Washington state Attorney General Rob McKenna said in a written statement.
Unsecured claims are currently valued between 22 cents and 25 cents on the dollar, Lockyer said.
“We’ll get some of it, we just don’t know yet how far the assets of Enron will stretch to these multiple claims,” Lockyer said in an interview Friday. “We hope to recover as much as possible.”
The settlement also calls for the company to pay a $600 million penalty to the three states. A penalty claim is one of the last to be paid under bankruptcy law, said Enron spokeswoman Jennifer Lowney, and may not be paid.
Lockyer has painted Enron as the mastermind of California’s energy crisis, which was marked by blackouts and soaring consumer energy prices. He accused the company of using trading schemes to drive up the cost of electricity in the state’s newly deregulated market.
“They were certainly the leader of the pack,” he said. “They were the company that invented a lot of the market manipulation games that allowed this to happen.”
Enron’s interim CEO Stephen Cooper said in a statement that the settlement helps Enron move forward to resolve its bankruptcy “so that we can accelerate distributions to all other creditors.” About $65 billion in claims are awaiting settlement in Enron’s bankruptcy case, company officials said. California’s claims will be joining that long line.
The Washington State Attorney General’s Office previously settled with three other companies for their roles in the 2000-2001 energy crisis. El Paso Corp. paid Washington $23 million. Williams Companies, Inc. and the Williams Energy Marketing and Trading Company settled for $15 million. Duke Energy Company has paid $3.25 million.
The proposed settlement does not resolve all claims rising from Enron’s behavior in the energy crisis, including litigation involving a contract termination claim involving Enron and the Snohomish Public Utility District.