March 19, 2001
UC, CSU seek preliminary injunction against energy supplier Enron
The University of California (UC) and the California State University (CSU) have
asked a federal court to issue a preliminary injunction to prevent Enron Energy Services,
Inc. from unilaterally altering the contract under which Enron delivers electrical
power and other services to the two university systems.
UC and CSU signed a four-year contract with Houston-based Enron in 1998 specifying
the amount and price of electricity and other services to be delivered to most campuses
within the two systems, and requiring Enron to perform a number of tasks which aid
UC and CSU in their conservation efforts. The contract is scheduled to expire March
31, 2002. The University of California at Riverside and UCLA have separate contracts.
Enron is seeking to change the contract a year before it expires by returning UC
and CSU to the electrical power distribution, scheduling and billing systems of Pacific
Gas & Electric (PG&E) and Southern California Edison (SCE). Such a move would
free Enron, an electricity generator and broker, to sell power previously intended
for delivery to the universities at higher prices on the spot market.
"A move by Enron to escape the requirements of the UC-CSU contract would mean
higher profits for Enron, but it has the potential for costing California students,
parents and taxpayers hundreds of millions of dollars in additional expenses,"
said Joe Mullinix, UC's senior vice president for business and finance.
"The California State University believes it is paramount that our status as
a direct-access customer be retained in this time of uncertainty resulting from the
state's energy crisis," said Richard West, CSU executive vice chancellor and
chief financial officer. "Enron's unilateral action is a clear breach of the
terms of our agreement and must be challenged. We have made extensive efforts to
negotiate our return to direct access status to no avail and we are now taking legal
action to correct this situation."
Specifically, the preliminary injunction sought from the U.S. District Court in Oakland
would require Enron to withdraw its demand that SCE and PG&E switch the electricity
meters on campuses in order to allow Enron to make the universities "bundled
customers" of PG&E and SCE. A "bundled" customer is one that receives
a package of services from a utility, including energy, billing, and distribution.
The unilateral changes sought by Enron would do the following:
- It would make UC and CSU potentially liable for helping PG&E and SCE pay
off billions of dollars in debts accumulated when neither system were SCE or PG&E
customers.
- It would result in removal of high-tech meters on UC and CSU campuses that provide sophisticated data on electricity use at peak loads, along with additional information the campuses use to conserve electricity. By switching the meters, the campuses would lose much of their data and conservation programs would become less effective.
- It would force a wholesale revamping of the complex billing systems set up by both university systems under the Enron contract at a potential cost of millions.
"The University of California and California State University entered into a
good-faith contract with Enron that would enable education, public service and research
to go ahead with assurance of an agreed-to arrangement for energy," Mullinix
said. "By unilaterally seeking to change the contract, Enron is presenting UC
and CSU with a set of circumstances that in addition to costing additional millions
of dollars, would seriously undermine both systems' comprehensive efforts to conserve
energy."
While UC generates approximately 21 percent of its power needs through its own
cogeneration plants, the university is one of the largest single users of electricity
in the state, with a systemwide peak load of 332 megawatts. A megawatt powers approximately
1,000 homes.
CSU generates approximately 10 percent of its total power needs, and its systemwide
peak load is about 117 megawatts.
CSU's annual electric bill is approximately $40 million and its natural gas bill
is about $20 million.
UC's annual electric bill is approximately $87 million, and its natural gas bill
is approximately $26 million.
