Energy Law

Final Skirmishes in Enron Contract Wars Draw to Close

By Tracy Davis

Resolving the last remaining claims against Enron stemming from the 2000-2001 California energy crisis, over the past week, FERC approved two settlements involving Enron:  one with the Port of Seattle, Washington (Port), and the other with Public Utility District No. 1 of Snohomish County, Washington (Snohomish).  The Port receives a $500,000 unsecured claim against Enron in its bankruptcy proceeding, while the Snohomish will pay Enron $18 million out of the $180 million that Snohomish allegedly owes Enron in termination fees arising from Snohomish's cancellation of contracts it entered into with Enron during 2001.  FERC's approval of these settlements puts an end to rancorous litigation between the parties and dismisses Enron from the various California refund proceedings.

The Enron-Port settlement continued the debate among the current Commissioners with respect to the Mobile-Sierra "public interest" standard of review for contract modifications.  Commissioners Kelly and Wellinghoff each filed separate opinions to the order approving that settlement, expressing disagreement with FERC's approval of the public interest standard.  Both Commissioners have consistently criticized FERC orders approving the inclusion of the public interest standard in settlement agreements, arguing that the Commission should not bind itself to the that standard, which allows unilateral changes to an agreement only if required by the greater "public interest" ? a singularly demanding burden of proof.  Instead, Commissioners Kelly and Wellinghoff have argued, FERC should approve modifications to settlement agreements so long as they are "just and reasonable," which is considered a less rigorous analysis and makes it easier for agreements to be modified in the future.

In two recent decisions currently before the Supreme Court (the so-called Long-Term Contracts decisions), the US Court of Appeals for the Ninth Circuit questioned whether the public interest standard applies where a buyer challenges a contract price as being too high.

Full post as published by Energy Legal Blog on January 11, 2008 (boomark / email).