Snohomish County Public Utility District No. 1

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Our Fight Against Enron

After a long-running legal battle, in 2007, the Snohomish County Public Utility District reached the best settlement made by any party on an Enron legal claim. The settlement helped the utility avoid paying a $180 million Enron claim regarding a multi-year energy contract executed during the 2000-2001 West Coast energy crisis.

Under the settlement, the PUD paid $18 million to Enron creditors to settle a claim of about $180 million that Enron sought from the PUD. The settlement represents only 10 cents on the dollar. Legal settlements between Enron and other parties have reached as high as 65 cents on the dollar or higher.

"The cloud has lifted," said PUD General Manager Steve Klein. "We can now move forward and focus more fully on power supply issues, meeting critical growth needs in our region, and taking an active leadership role in shaping our future. By resolving this issue, we remove a significant financial risk and any possible rate impact on our customers."

The settlement followed several positive legal rulings at the Federal Energy Regulatory Commission (FERC). However, in July 2007, the PUD would have faced a binding arbitration panel in which the entire $180 million would be on the line. The settlement prevented an uncertain legal outcome and potentially several additional years of litigation for the PUD.

Background:

The PUD's five-year legal challenge with Enron captured international attention, due in large part to the utility's relentless efforts on behalf of consumers in the Pacific Northwest. In 2004, the utility uncovered audiotapes and financial records that proved former energy giant Enron bilked consumers in the western U.S. of more than $1 billion. 

Tapes of profanity-laden phone calls revealed what Enron traders thought about "Grandma Millie" and how traders were taught to "weave lies together" to jack up the price of energy. Snohomish PUD filed more than 1,200 pages of such evidence at FERC, the agency charged with protecting consumers from unjust energy pricing.

"Even a cursory review of the transcripts should have led FERC to the obvious conclusion that Enron manipulated the market," said former PUD Board of Commissioners President Cynthia First. "It's absolutely criminal."

The PUD spent several months reviewing thousands of hours of audio tapes and researching Enron records in order to help negate a $180 million lawsuit that Enron filed against the PUD for canceling the energy contract in 2001. FERC, which initially argued the tapes should not be considered in ongoing Enron proceedings, largely ignored pleas from Northwest utilities and consumers to properly investigate market manipulation by Enron.

In the taped conversations, Enron employees talked openly about "stealing" up to $2 million a day from California during the energy crisis.  Traders also joke about taking money from Grandma Millie and making "buckets of money" from over-scheduling electricity transmission lines and taking power plants off line. 

Related financial documents, covering the period of January 2000 through mid-2001, showed Enron manipulated energy markets on 88 percent of the days the PUD tracked. In one "ricochet" scheme, Enron illegally obtained $222,678 in a three-hour period by purchasing power in California, shipping it to Oregon where its original source was masked, and then reselling it into the California market for $750 per megawatt-hour. The scheme allowed Enron to avoid price caps.    

Huge Support for PUD

Members of the Washington congressional delegation joined with the PUD in calling on FERC to launch a special investigation and take action against Enron. U.S. Senator Maria Cantwell criticized FERC for its efforts in late 2003 to quash a subpoena for Enron audiotapes sought by the PUD.  Meanwhile, U.S. Reps. Jay Inslee and Rick Larsen stressed FERC's obligation "to protect electricity customers from just and unreasonable rates."

The Enron tapes thrust Snohomish PUD into the national - and even international - media spotlight.  In June 2004, the utility managed hundreds of media stories, generating coverage on all three major TV networks, plus pieces by CNN, BBC, CBC, National Public Radio, Voice of America and news reports in France, Australia and Japan. Newspaper coverage appeared throughout the country, including articles in the New York Times, Washington Post, L.A. Times, Houston Chronicle, the Oregonian and the San Francisco Chronicle.  Associated Press, Reuters, Dow Jones Newswire and other wire services also covered the story.  Even Comedy Central weighed in, creating a skit about the Enron tapes for the "Daily Show with Jon Stewart."