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 -----Original Message-----
From:  Schmidt, Ann M.  
Sent: Wednesday, July 25, 2001 11:22 AM
To: Denne, Karen
Subject: Enron says would not pay California refund 

Enron says would not pay California refund 
July 25, 2001 12:01 PM ET 
By Timothy Gardner 
NEW YORK, July 25 (Reuters) - Energy firm Enron Corp. (ENE 
<quotelogic.jhtml?ticker=ENE>) would not pay its "minuscule" portion of the 
nearly $9 billion California claims energy companies owe the state for 
overcharges during the Western power crunch, Enron President and Chief 
Executive Officer Jeff Skilling said on Wednesday. 
California alleges that electricity generators and marketers owe the state 
$8.9 billion for overcharging it during the power crisis from mid-2000 to 
last spring. Governor Gray Davis, a Democrat, said he is prepared to go to 
court to retrieve the money. 
But Enron, the No. 1 U.S. natural gas and electricity marketer, does not 
intend to pay its portion of the alleged overcharges. which Skilling said was 
"minuscule." 
"The $9 billion number is bogus to begin with," Skilling told analysts at a 
meeting about Enron's second-quarter earnings in New York. Skilling said 
Enron's share of the alleged overcharge is $38.5 million. He said Enron 
should in fact recover $32 million in net purchases from California. 
At least one sector of California's electricity regulation system agrees that 
Enron's involvement was small in the power crisis, in which electricity 
prices reached records and rolling brownouts darkened many areas. 
Sales records kept by the California Independent System Operator, which 
manages most of the state's power grid, show Enron accounted for 0.4 percent 
of the alleged $9 billion overcharge. 
The Federal Energy Regulatory Commission is meeting on Wednesday in its 
biweekly commissioners meeting, in part to consider the refunds after a 
federal mediator rejected California's claims. On July 12. FERC Chief 
Administration Judge Curtis Wagner swung the issue back to the commission for 
further action. Wednesday's meeting is the last scheduled before the 
commission takes a month-long break. 
STILL ROUNDS TO BE FOUGHT IN CALIFORNIA 
Enron's problems in California are far from being settled. A committee of the 
California Senate investigating suspected price gouging during the power 
crunch recently found Enron in contempt for refusing to disclose confidential 
sales and bidding records. 
The California Senate last used the contempt ruling in 1929 against a cement 
company, but eventually the state's Supreme Court threw out the ruling, 
saying the charges were too vague. 
Just before the California Senate voted to hold Enron in contempt, the 
Houston-based company sued in a California court on a claim that FERC, not 
the California Senate, had jurisdiction. 
"They (California) are making political noise we don't like," said Skilling. 
He said if the situation got worse the company could reduce its market share 
there. "We'll walk away from the situation and reserve out," he said. 
Although Enron claims little involvement in the alleged overcharge, the 
company says it has learned from the crisis. 
Skilling said that looking forward, Enron will avoid dealing with 
intermediaries that the company contends helped lead to the power crunch. 
"We're focused on retail in California; we're going direct to customers 
without dealing with an intermediary," said Skilling. 
Shares in Enron, which reported earnings slightly better than expected on 
July 12, were down 34 cents to $42.90 in early trade on the New York Stock 
Exchange. That is down from its peak this year of more than $81, hit in 
mid-February in the depths of the Western power crunch. 

    --
 REUTERS