Daily Archives: March 1, 2005

A small utility’s $122 million anti-Enron P.R. campaign

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Despite hiking electricity rates 50 percent in the past four years and disconnecting a record number of customers for failure to pay bills, a Seattle area, publicly-owned utility has become a West Coast hero for, as this Washington Post article puts it, “goring the bankrupt carcass of the disgraced Enron Corp. and spilling buckets of deliciously embarrassing blood.”
Snohomish County Public Utility District entered into a costly nine-year contract with Enron in January 2001 during the middle of the West Coast power crisis. At the time, the spot-market cost of regional power had spiked more than a hundred-fold due primarily to dysfunction related to dysfunctional deregulation of power markets. Snohomish’s deal with Enron committed the utility to buy power at three times the cost of any previous long-term contract and about four times the historical rate for electricity in the Pacific Northwest. As a result, the utility had to increase rates substantially to its 295,000 customers.
When Enron filed bankruptcy late 2001, Snohomish seized the opportunity to terminate the Enron contract, which by that time was over-market. Enron’s bankruptcy estate filed an illegal termination claim against the utility seeking $122 million in damages for lost profits from the terminated contract.
Rather than simply fight the Enron lawsuit on technical legal grounds, Snohomish took a more creative approach — the utility sought to obtain through discovery audiotapes of hours of ludicrously obnoxious conversations between Enron power traders during the West Coast power crisis of 2000-2001. The Justice Department had seized the tapes in connection with its criminal investigation into Enron, and a federal judge eventually ordered the government to turn copies of the tapes over to the utility.
The tapes proved to be a gold mine for Snohomish, which has spent about $200,000 over the past year on a team of transcribers who are transcribing more than 2,800 hours of recordings. The first transcriptions of the cynical conversations were released this past June and created a firestorm of media attention even in this Enron-soaked media environment. The utility has continued to release damning transcripts to the public periodically since that time.
Nevertheless, it’s far from clear that the discovery of the obnoxious Enron trader conversations will have any effect whatsoever on the legal question of whether the Snohomish is liable for the $122 million in damages to the Enron estate. That issue remains pending before a federal administrative judge and a decision is expected later this year. Consequently, the entire affair may turn out to be a $122 million anti-Enron public relations campaign for the utility, which commonly receives emails from its customers such as this one quoted in the WaPo article: “I just want to say, ‘You guys rock!'”
I wonder if that customer will have the same reaction if he has to pay his $420 share of the utility’s anti-Enron P.R. campaign cost?

What a way to start spring training

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This week started well yesterday when the mailman delivered the always eagerly awaited copy of the Baseball Prospectus, which is flat out the best annual baseball book on the market.
So, in anticipation of reviewing this year’s edition, I cruised over to the Baseball Prospectus ($) website to check things out, only to find Joe Sheehan dropping some serious bad karma on the Stros. After identifying the Indians as the team most likely to take a big step forward this season, Mr. Sheehan votes the Stros most likely to take a big step in the other direction:

The flip side of the Indians’ story is that of the Astros. Their Cinderella run from seventh in the wild-card chase to the seventh game of the ALCS was one of ’04’s great stories. It also provided an object lesson in how the length of the baseball season makes fools of those of us who make broad statements based on how things look at any point in time.
On February 28, though, it’s hard to see how the Astros can repeat last year’s success. They are going to lose a ton of runs from even last year’s average attack–seventh in the NL in EqA. Carlos Beltran is gone. Jeff Kent is gone. Their best hitter, Lance Berkman, is going to miss at least a few weeks rehabbing a knee injury. Jeff Bagwell and Craig Biggio are a year older. Even in the best-case scenario, where Chris Burke and Jason Lane are allowed to win jobs and both hit to expectations, that just makes up for the losses of Beltran and Kent.

After pointing out the Stros’ inexplicable continued reliance on Brad Ausmus, and the problems that Bidg creates in blocking the progress of younger players, Mr. Sheehan turns to the Stros’ pitching staff:

The Astros aren’t going to make it up on the pitching side. Keeping Roger Clemens around just kept them running in place. They still have the same depth issues as they did a year ago, with a host of injury cases and suspects vying to fill out the rotation behind Clemens and Roy Oswalt and the bullpen in front of Brad Lidge. A healthy Andy Pettitte makes up some of that, but there’s still the question of whether two starters can be found from among Brandon Backe, Carlos Hernandez, Tim Redding, or even a longshot like Ezequiel Astacio.

Mr. Sheehan concludes with the following ominous warning:

Last year’s playoff run happened because the front end of the Astros’ roster included some very dominant players. They’re down two stars this year, and the likelihood that Clemens and Lidge can match ’04’s work is slim. They don’t have the depth to make up for that kind of slippage. Not only are the Astros unlikely to return to the postseason, I doubt they can stay in contention.

Well, that analysis did not make my day.
I will have more on the Stros later during spring training, but my short retort to the above analysis is that Mr. Sheehan overstates the Stros’ problems, just like he did last August in this earlier post. Thus, even the best sabermetricians are not infallible.
Although the Stros are clearly a team in transition from the Biggio-Bagwell era, I’m cautiously optimistic that the club can continue to contend even during this period. Yes, losing Beltran hurt, but as noted here, not as much for the long term prospects of the club as one might think. Moroever, my sense is that the loss of Kent will be nowhere near as big a problem as Mr. Sheehan makes it out to be, particularly if Chris Burke emerges as a solid major leaguer. In fact, if now seasoned veterans such as Ensberg and Everett can become just average National League hitters this season, then that improvement will likely more than make up for any difference in run production between Beltran and his replacement, Jason Lane. Finally, both of the Stros’ main National League Central rivals — the Cardinals and the Cubs — are notably weaker this season, so I don’t see either of those clubs, or the improved Reds, running away from the Stros in the division race.
Consequently, despite Mr. Sheehan’s reservations, don’t give up on the Stros just yet. This is a club that has been pretty darn good for a very long time, and I don’t see it as one that will slide into mediocrity without a good fight. Let’s at least wait to see how spring training unfolds.