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?