California has reached a $1.5 billion settlement with Enron Corp. and its affiliates to resolve claims brought against the company for overcharging California electricity consumers during 2000 and 2001.
The Enron settlement, which needs approval from federal energy regulators and bankruptcy court, is structured to provide $25 million in cash, $875 million in unsecured bankruptcy claims and $22.3 million held at the California Independent System Operator as collateral for meter claims, as well as $600 million in civil penalties and up to $1 million in charges related to the now-defunct California Power Exchange.
The agreement will be worth about $260 million to California ratepayers, according to the governor's office. Enron came out of bankruptcy last year to sell off the remainder of its assets and resolve about $74 billion in creditors' claims. Under its bankruptcy plan, the $875 million unsecured claim may get paid at about 20 cents on the dollar, while the $600 million subordinated claim will receive a lower payment. Enron was the country's seventh-largest energy company before accounting scandals led to its collapse in 2001.
"This latest victory for ratepayers will help keep the costs of electricity low for the people and businesses of California," said Gov. Arnold Schwarzenegger in a statement. "I will continue to press for settlements of all outstanding claims against those who unfairly profited at the expense of California's ratepayers. We must also work to make sure that California never finds itself in a position to be taken advantage of again."
Since 2004, California has negotiated more than $2.7 billion in settlements with various energy companies that reaped large profits in California during 2000 and 2001. Washington and Oregon will also receive $22.5 million from the unsecured claim in the Enron settlement."This settlement represents the latest in a series of significant issues that have been resolved in Enron's bankruptcy proceedings," said Enron chief executive Stephen Cooper in a statement. "Settlements such as this one allow us to remove claims against the estate, so that we can accelerate distributions to all other creditors."
