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FERC OKs Four Settlements Tied to Enron Activities in Western Markets

FERC last week approved a settlement between Enron Power Marketing Inc. (EPMI) and Commission trial staff resolving pending matters stemming from Enron's activities during the 2000-2001 Western energy crisis. The agency also approved three other settlements involving contract termination disputes between Enron and the Valley Electric Association of Nevada, the city of Santa Clara, CA, and the Metropolitan Water District of Southern California.

Under terms of the settlements, Enron would be released from past, existing and future claims involving the settling parties arising from the Commission's determinations on Enron's actions during the western electricity crisis.

The settlements resolve all issues against Enron involving disgorgement of profits and other remedies sought by Commission trial staff, Valley Electric Association, a Nevada electric cooperative, the city of Santa Clara and the Metropolitan Water District of Southern California.

Under terms of the settlements, Enron would be released from past, existing and future claims involving the settling parties arising from the Commission's determinations on Enron's actions during the western electricity crisis.

Enron agrees to:

"The monetary consideration in these settlements represents a fair resolution of the disputes and is thus in the public interest," the Commission said.

The settling parties "assessed the risks and benefits of continuing their litigation with Enron and determined, on the basis of those assessments, that the monetary and other considerations outweigh the uncertainty of continued litigation and possibility of lesser relief," the Commission said.

In its settlement, Valley Electric will pay Enron a contract termination payment of $8 million. Santa Clara has agreed to pay Enron a $36.5 million contract termination payment. The Metropolitan Water District agreed to pay Enron a $316,000 contract termination payment.

FERC also exercised its exclusive jurisdiction under section 1290 of the Energy Policy Act of 2005 and found that the Snohomish Public Utility District of Everett, WA, is not obligated to pay a contract termination fee to Enron. The Commission denied Enron's termination claim upon a finding that Enron's financial fraud induced Snohomish to enter into the contract.

While the settlement with trial staff did not preclude access to evidence against Enron in ongoing litigation before the Commission, FERC modified certain elements of the settlement to further this access for nonsettling parties. The Commission made certain that "nothing in today's order precludes other nonsettling parties from access to or use of Enron trader tapes or other evidence in the record of these proceedings." The Commission found that the public interest is served by trial staff's continued participation in ongoing proceedings among the nonsettling parties.

Approval of the trial staff settlement, subject to modification, "will not adversely affect nonsettling parties in prosecuting their cases fully," the Commission said.

"It is important to note that the procedural rights of nonsettling parties are not affected by today's settlements," said FERC Chairman Joseph Kelliher. "Nevertheless, the public interest is served by modifying this settlement and having trial staff continue as a participant in any ongoing Enron-related proceedings. Therefore, we are rejecting those sections of the settlement that refer to trial staff's withdrawal."

The Commission emphasized that certain evidence in these proceedings is subject to a protective order the Department of Justice (DOJ) obtained from the U.S. District Court for the Northern District of California, to protect evidence in ongoing criminal prosecutions of former Enron employees. Access to this information is obtained only by signing the DOJ protective order, and release of the information by trial staff or any other party may result in court sanctions, the Commission noted.

FERC also dismissed a petition from the city of Vernon, CA, for relief under section 1290 of the Energy Policy Act, finding that the contract does not qualify for relief under that provision.

In related news last week, Enron, the city of Tacoma, WA and FERC trial staff filed a settlement at the Commission that resolves various matters and claims related to Enron's actions and transactions in the western energy markets from early 1997 through June 25, 2003.

Through settlement judge procedures, Enron and Tacoma have negotiated and executed the settlement agreement. If the agreement is approved, Tacoma will be allowed claims totaling $3,288,519.71 in Enron's bankruptcy proceedings, "without offset, defense or reduction, representing the full amount of Tacoma's timely-filed proof of claim in those bankruptcy proceedings," the filing said.

Meanwhile, the Montana attorney general, Enron and FERC trial staff have collectively "agreed in principle on terms and conditions that will resolve all issues" between the parties in pending dockets related to Enron's activities in western energy markets several years ago.

"The settling parties are in the process of preparing formal documentation of their agreement and will file the same in the near future," a June 27 letter to FERC Administrative Law Judge Carmen Cintron states. The letter was sent to Cintron from attorneys based in Montana and Houston.

In a press release issued last Wednesday, Enron reported that it reached an agreement in principle to settle all civil and contractual claims between the company, and certain of its subsidiaries, and the Montana attorney general. The agreement has also been joined by FERC trial staff. At issue are natural gas and electricity transactions in the western U.S. from 1997-2003.

In consideration of its dismissal and release of all claims against Enron, the Montana attorney general will receive a $300,000 allocated portion of an unsecured FERC trial staff bankruptcy claim and a $1 million subordinated penalty claim.

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