California State Attorney General Bill Lockyer, who filed a ``friend of the court'' brief in the case, said that Enron's [motive] "seems to be to rip off California consumers.'' Enron is saying ``we don't want to sell power at the prices we promised,'' he said. Judge orders Enron to give Calif. universities power By C. Bryson Hull SAN FRANCISCO, April 11 (Reuters) - A federal judge on Wednesday ordered Enron Corp. <ENE.N> to switch two California universities back to direct-access power and take them off traditional service with the state's shattered and cash-strapped utilities. U.S. District Judge Phyllis Hamilton entered a temporary injunction requiring Enron Energy Services (EES), the Houston-based company's power risk management arm, to provide power directly to the University of California and the California State University systems. The universities sued EES last month, claiming EES breached their four-year contract, signed in 1998, to provide power at a 5 percent discount to the utility rate frozen by the state's 1996 deregulation law. EES entered into the deal with the universities, valued at $500 million, in 1998 amid much fanfare about how Enron would be able to save money for the state by managing price risk, guaranteeing low costs, and administering the power at the hundreds of school facilities. EES has seen a huge upsurge in their business, recently signing a string of multimillion dollar contracts to provide long-term power management services for large corporations. The suit arose from Enron's decision to stop providing a peak power load of 350 megawatts directly to the universities customers. Enron said they decided to stop doing so because their distribution deals with California's two largest investor-owned utilities, PG&E Corp.'s <PCG.N> Pacific Gas and Electric and Edison International's <EIX.N> Southern California Edison, fell through. Enron also cited the collapse of the California Power Exchange as a cause, but the schools dispute that because Enron provides power it buys from San Diego Gas & Electric to campuses in that area. The universities claimed that they would be irreparably harmed if they were forced to take their power from nearly bankrupt SoCal Edison and Pacific Gas and Electric, which is in bankruptcy proceedings now. "I am persuaded, in the end, that indeed there is a very strong likelihood of success on the breach of contract claim," Hamilton said. "Enron did not have the right to return the universities to traditional utility service." The judge took note of Pacific Gas and Electric's filing for Chapter 11 bankruptcy reorganization last week in making her ruling. "The precarious nature of PG&E I think lends strength to the plaintiff's positions," Hamilton said. The schools argue the switch to traditional utilities was made so Enron could sell power intended for the universities on the open market at a huge profit, a charge Enron denies. Enron argues a clause in their contract allows them to change their customer's power sources at their discretion, and also that they would lose $12 million a month if they provided direct access service. "It is simply unreasonable for a company like Enron to not manage its financial risk by returning the universities to utility power," Enron attorney William Urquhart said. "What that means is 'we really don't want to sell power at the prices we promised,'" California Attorney General Bill Lockyer later told Hamilton. Lockyer filed an amicus brief on behalf of the universities. Urquhart argued that Enron is delivering its end of the deal because the schools are still getting their power at the discounted rate. "It's all about money, and if it's all about money, then no injunction should issue," he said. The order is in effect immediately and will last until trial, barring appellate intervention, which Enron is seeking with an immediate appeal to the U.S. 9th Circuit Court of Appeals. The state was required to post a $1 million bond should their claims fail at trial. Enron Unit Must Honor Pact With California Schools San Francisco, April 11 (Bloomberg) -- An Enron Corp. unit must provide electricity to California universities under an existing contract, U.S. District Judge Phyllis J. Hamilton ordered. Enron Energy Services Inc. had agreed to provide energy and related services to the University of California and California State University, said Douglas R. Young, a lawyer for the universities. The company cut off the schools on Feb. 1, and transferred the accounts to PG&E Corp. and Edison International utilities, Young said at a hearing today in San Francisco. The schools say they want to keep the contract with Enron, because it is more reliable than the utilities. Both utilities are burdened with billions in power-buying debt, and Pacific Gas & Electric Co. has filed for bankruptcy. The utilities' customers have been subjected to rolling blackouts amid power shortages in the state. ``Enron did not have the right to return the university systems to the utilities,'' Hamilton said. She granted the universities a preliminary injunction, forcing Enron to honor the contract for now. Enron lawyer A. William Urquhart said the company didn't cancel the contract; it just switched the source of supply to the utilities. Enron said it will file an immediate appeal with the 9th U.S. Circuit Court of Appeal in San Francisco. Enron and the universities announced the four-year contract in 1998, valuing the agreement at $300 million to $500 million in electricity sales. Cal State would save $1.5 million a year through the contract, they said, and U.C. would save $2.4 million. The Switch During the hearing, Urquhart said Enron had a ``responsibility to its shareholders'' to make financially prudent decisions. At most, the universities have suffered some economic damage, which would not entitle them to enforce the contract, Urquhart said. California Attorney General Bill Lockyer, who filed a ``friend of the court'' brief in the case, said that Enron's duty to its shareholders ``seems to be to rip off California consumers.'' Enron is saying ``we don't want to sell power at the prices we promised,'' Lockyer said. ``We continue to believe that we're acting in the best interests of our clients,' Enron Energy Services spokeswoman Peggy Mahoney said after the hearing. Enron continues to honor the financial terms of the contract, even though it no longer supplies the power, Mahoney said. The universities continue to be charged the lower contractual amount for the power they receive from the utilities, with the difference made up by Enron, she said. She said the volatility of the California spot market and the bankruptcy of the defunct California Power Exchange, the market where the state's power was bought and sold, made Enron decide to turn the universities' supply needs over to the utilities. Lawsuit The universities sued Enron in March, seeking to enforce the four-year contract. The schools also said in court documents that buying from utilities would render obsolete new electricity meters that help them conserve. The universities have installed meters to collect data on consumption, helping them reduce power bills. Those $1,500 meters can't be used on the ``bundled'' systems like the utilities' and would have to be removed, said Charles McFadden, spokesman for the University of California. Enron says that it has offered to continue to provide all campuses with the metering, billing and related services under the agreement. Judge Hamilton ordered the universities to post a $1 million bond. The routine order assures Enron's losses will be paid, if the energy company prevails in the case.
