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FOR IMMEDIATE RELEASE
July 05, 2005
McKenna Announces Energy Crisis Settlement with Enron


SEATTLE -- Attorney General Rob McKenna today announced a $1.52 billion multistate settlement with Enron to resolve some of the claims of market manipulation and price gouging stemming from the energy shortage of 2000-2001.

The states of Washington, California and Oregon, as well as some California utilities and other organizations, are parties to the settlement. The agreement must be approved by the Federal Energy Regulatory Commission (FERC) and the Enron bankruptcy court.

"Enron used malicious tactics to illegally manipulate the energy market and get rich at the expense of Washington utility companies and residents,” McKenna said. “This settlement is a bittersweet victory because although the penalties are significant, litigation almost always brings incomplete recovery and, as a result of Enron’s bankruptcy, we’ll likely see only pennies on the dollar.”

Enron traders engaged in numerous incidents of unlawful conduct in Washington state, McKenna said. During the 2000-2001 energy crisis, the company overcharged Washington utilities by millions of dollars for wholesale electricity, resulting in utility rate increases passed along to consumers.

The proposed settlement resolves certain claims now pending before FERC and in the Enron bankruptcy. It does not resolve all claims rising from Enron’s behavior in the energy crisis – such as litigation involving a contract termination claim involving Enron and the Snohomish Public Utility District – nor does it prevent the state from pursuing criminal charges against Enron.

Under this settlement, Washington and Oregon each receive more than $22 million in unsecured bankruptcy claims. However, the amount ultimately paid by Enron under the settlement will not be known until the bankruptcy court decides on a distribution amount and schedule, which could take a year or more. Attorneys anticipate the final amount actually received by Washington will be just a few million dollars.

Prior to declaring bankruptcy, Enron was reportedly the largest wholesale power marketer in North America by sales volume, and made nearly $2 billion in profits during from its electricity trading operations in the Western states during 2000 and 2001.

The attorneys allege that Enron traders manipulated the energy market with schemes dubbed with such colorful names as “Death Star,” “Fat Boy,” “Get Shorty,” “Ricochet,” and “Load Shift.”

The “Fat Boy” scam, for example, involved “overscheduling” power transmission to a company subsidiary that didn’t really need all of it. Then Enron would sell the “excess” power to the state at a premium.

With "Ricochet,” Enron bought power cheaply from California, sold it to an intermediary in another state, then sold it back to California at an inflated price.

In addition, the company engaged in “wash trades” to manipulate index prices and falsely create the appearance of higher volume trading, thereby boosting their credit and stock status.

The Washington State Attorney General’s Office previously settled with three other companies for their roles in the 2000-2001 energy crisis. El Paso Corp. paid Washington $23 million. Williams Companies, Inc. and the Williams Energy Marketing and Trading Company settled for $15 million. Duke Energy Company paid $3.25 million.

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For more information contact:
Kristin Alexander, Public Information Officer
Attorney General's Office, (206) 464-6432

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