The San Joaquin Delta Community College District Board of Trustees is expected to pay almost $142,000 to Enron, the Houston-based energy retailer that went bankrupt in late 2001.
Enron originally sued the district for $430,000 for unpaid electricity bills accrued sometime between 2001 and 2002, but lawyers for the district negotiated the lesser amount.
"We got a good deal," said Ray Giles of the Community College League of California, a public benefit corporation whose membership consists of 72 community college districts in California.
In 1999, Delta, along with 35 others belonging to the College League, signed a long-term contract with Enron for the company to supply electricity at a 5.5 percent discount from market prices.
But Enron suddenly terminated the contract in early 2001, at a time when its stock was trading at more than $81. Its stock was worthless by Dec. 2 of the same year, when the company declared bankruptcy.
Meanwhile, the district went back to paying market rates from Pacific Gas and Electric Co., but kept paying Enron.
It wasn't until late in 2002 that lawyers for the League recommended that the college withhold payment on the invoices, said Andy Dunn, president of Delta business services.
The Enron contract could have been extended to 10 years, saving the district nearly $7 million in projected energy costs, Dunn said.
But everything was moot after Enron went bankrupt. Many of the college districts still owed the company, and most were waiting for the smoke to clear before paying. Enron still exists as a company, but only to liquidate assets and pay back its creditors.
The negotiated settlement saved Delta $330,000, Giles said. The $141,595 payment means that the district saved nearly four times the discount under the original contract, he said.
"And it saved a lot more in time and legal costs than if we had gone to court," he said.
The Delta board has yet to sign off on the deal, though trustees are expected to do so within weeks.
Contact reporter Phil Hayworth at firstname.lastname@example.org.
First published: Friday, February 24, 2006 6:22:43 AM