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West Coast States, Enron Reach $1.52B Settlement on Manipulation Claims

July 18, 2005
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California Attorney General Bill Lockyer on Friday announced a $1.52 billion settlement with Enron Corp. to resolve market manipulation and price-gouging claims stemming from the sale of natural gas and electricity during the 2000-2001 energy crisis on the West Coast.

The proposed settlement resolves claims made by Southern California Edison (SCE), Pacific Gas and Electric (PG&E), San Diego Gas & Electric, the California Public Utilities Commission (CPUC), the California Electricity Oversight Board (EOB), the California Department of Water Resources Electric Power Fund and the state's attorney general, as well as the attorneys general of Oregon and Washington.

The agreement calls for the California parties to receive an $875 million unsecured claim in the Enron bankruptcy proceeding, plus $47.5 million in cash, according to Lockyer's office. The California parties would provide the Washington and Oregon attorneys general $22.5 million each from the unsecured bankruptcy claim. Additionally, Lockyer and the other attorneys generals would receive a combined $600 million penalty, which would be a subordinated claim in the bankruptcy proceeding.

The amount ultimately paid by Enron under the settlement will not be known until the company's Chapter 11 bankruptcy proceeding is completed, Lockyer's office said. The current estimated value of the overall claim is 22.8 cents on the dollar, SCE said in a prepared statement. "It's a safe bet that creditors will get [only] 20-30%" of the proposed settlement.

The Enron settlement is the 10th produced by Lockyer's Energy Task Force, working in cooperation with the CPUC, EOB, governor's office, the California Department of Water Resources, PG&E and SCE. He estimated that the 10 settlements have a combined value of $4.9 billion, of which an estimated $3.64 billion represents ratepayer relief. Some of the other suppliers that have reached settlements to resolve claims arising from the 2000-2001 energy crisis include El Paso Corp., Williams Cos., Dynegy, Duke Energy and Mirant Corp.

Aside from resolving the refund claims, the proposed settlement would end a lawsuit brought by Lockyer against Enron, alleging that company-devised market manipulation games, such as Fat Boy and Death Star, violated California's commodities fraud laws.

The Enron settlement requires the approval of the CPUC, the Federal Energy Regulatory Commission and the Enron bankruptcy court. If approved, it would resolve, among other things, Enron's portion of claims by the West Coast parties in the current FERC refund case, any additional refund obligations it might have incurred at FERC for sales into California energy markets during the summer of 2000, and certain potential civil claims.

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