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Washington PUD Asks FERC to Reject $117M-Plus Payment Sought by Enron

Public Utility District (PUD) No. 1 of Snohomish County, WA, has asked FERC to exercise its exclusive jurisdiction and declare Enron Power Marketing Inc.'s claim for a "termination payment" of $117 million invalid.

Enron's contract with the PUD is "quite plainly unjust and unreasonable and contrary to the public interest because the contract is infected with fraud, deception and misrepresentation," Snohomish said in the Aug. 5 filing. "As the Commission already has found, Enron manipulated the electricity market, resulting in unjust and unreasonable rates."

Snohomish said the "unjust and unreasonable termination payment demanded by Enron is based upon an unjust and unreasonable rate contained in an unjust and unreasonable contract that was executed illegally by Enron when Enron was in violation of its market-based rate authority." Therefore, the PUD said the termination payment "cannot lawfully be demanded or charged by Enron" under the Federal Power Act (FPA).

Moreover, the PUD noted that when the U.S. Congress this year passed the Energy Policy Act of 2005, the legislative body "clearly expressed its intent to bestow upon the Commission the authority and the responsibility to protect electric consumers from market manipulators, such as Enron."

A provision giving exclusive jurisdiction to FERC to decide whether Snohomish and Sierra Pacific Resources owe Enron termination payments pursuant to contracts now under review at the bankruptcy court was included in the final energy bill package passed by Congress and recently signed into law by President Bush (see related story).

Also, in December 2000, FERC assured consumers that it would be vigilant in monitoring the wholesale power market for abuses, Snohomish added.

"Unfortunately, Enron for years hid its illegal behavior from the Commission, from the financial markets and from energy market participants," the PUD said. "Now that the Commission is well-aware of Enron's misconduct and Congress has armed the Commission with exclusive power to prevent Enron from charging termination payments, the time has come for the Commission to finally put an end to Enron's exploitation of electric consumers under contracts that were part and parcel of Enron's massive fraud on the energy and financial markets."

Citing an abundance of caution, Snohomish noted that it was filing the request for a declaratory order, or in the alternative a complaint, "to ensure that the Commission has before it a pleading and an appropriate forum in which to exercise every remedy available within its exclusive jurisdiction, to the extent such remedies are not already contemplated by the Commission" in an ongoing gaming and partnership proceeding.

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