Enron Inks Army Base to 'First-of-its-Kind' Utility Deal
Calling it the first comprehensive grouped-utility privatization
contract awarded by the Department of Defense (DOD), the U.S. Army
Military District of Washington and Enron Federal Solutions Inc.
announced a 10-year $24.8 million deal last week. The Enron
subsidiary will manage all of New York-based Fort Hamilton's
utility needs. The announcement was made at Fort McNair in
The utility privatization project is the first comprehensive,
grouped solution to meet the Secretary of Defense's Defense Reform
Initiative Directive (DRID) 49 which directs all services to
privatize their utility systems by September 30, 2003. Fort
Hamilton is one of five subordinate installations that belong to
the U.S. Army Military District of Washington. The Enron agreement
has no bearing on the other installations said Dov Schwartz, an
The contract transfers ownership of all utilities at Fort
Hamilton (electric, gas, water, waste water, and storm water) to
Enron, and requires it to operate, rehabilitate, and maintain the
utility systems for the 10-year contract period. It is not a supply
contract, however, and the Army will continue to purchase its
energy on the open market, an Enron spokesperson said.
The deal is not without skeptics. On Dec. 7, the Edison Electric
Institute (EEI) issued a request for the FP details to the Army
Corp. of Engineers under the Freedom of Information Act (FIA).
Patrice Hagmann, an EEI spokeswoman, said the institute is not
alleging any wrongdoing yet, but would like to get more information
concerning the exact details of the contract. "This is the first of
what will be many privatization contracts like this one, and our
membership wants to make sure that there is a clear understanding
of what the DRID allows."
According to Hagmann, Enron was the only company to bid for the
contract. Member companies of the EEI said they did not participate
because they thought the DRID required an ownership transfer of the
distribution systems. As it stands now, Hagmann said the EEI
believes Enron's deal with Fort Hamilton is more of a capital lease
for the systems. "There are serious tax and financial differences
between the two, and a capital lease is very attractive.
Unfortunately, our understanding of the directive led us to believe
that transfer of ownership had to occur." Under FIA rules, the EEI
will get a response to its filing within 20 working days.
This infrastructure issue is one of many topics
industry-watchers said could arise from the privatizing directive
(see NGI, Sept. 20).
For its part, Enron said nothing is wrong with the contract. "We
simply competed in the RFP," said Peggy Mahoney, an Enron
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