Ann de Rouffignac
HOUSTON, Dec. 3, 2001 Enron Corp.’s retail energy unit Monday said it is doing what it can to “keep the lights on” at thousands of commercial and industrial customer sites nationwide.
The retail energy services group is in the process of reviewing all of its gas and electric power supply contracts and looking at all options, said Peggy Mahoney, spokeswoman for Enron Energy Services Inc. The company Monday said it will “notify all customers of any changes” to existing contracts.
If Enron is unable to continue service, the company said it “will work to accomplish a smooth transition to a new service provider, such as your local utility.” It said the process, price, and service levels will vary by utility.
“The last thing we want is for the power to be disconnected. We are working to put in place procedures so no power will go out,” she said. Mahoney would not go into detail about the options EES is pursuing. EES is one of the units included in the bankruptcy protection filing by its parent Enron Corp. and other Enron businesses Sunday.
The retail business has contracts in place to supply and manage energy at more than 28,500 customer sites, ranging from drug giant Eli Lilly & Co. to Starwood Hotels & Resorts Worldwide Inc., one of the world’s largest hospitality companies. Enron also has similar contracts with Quaker Oats Co. and glass manufacturer Owens-Illinois Inc.
The Enron unit agreed to supply energy, often at a rate lower than a consumer could get from a local utility. Contracts signed over the last 2 years represented 8 billion kw-hrs and 18 trillion btus of natural gas to be supplied between 2000 and 2012, according to the company.
Since the bankruptcy filing, some large EES customers may already have opted for alternative suppliers of gas and power, she said.
“Many large customers have clauses in their contracts to be able to get other suppliers if necessary,” Mahoney said. Some contracts had cancellation provisions that could be activated if Enron’s credit rating dropped below investment grade. All three major credit rating agencies downgraded Enron to below investment grade last week.
Eli Lilly is receiving natural gas from an alternative supplier, said spokeswoman Joan Todd. The Indianapolis-based drug company signed a $1.3 billion, 15-year energy management agreement with EES earlier this year.
Enron was supposed to manage the supply of electricity and natural gas for its manufacturing facilities and corporate headquarters in Indiana and provide operations and maintenance and energy infrastructure upgrades on facilities. “We had contingency plans as with any contract,” said Todd. “We will continue to run our own utilities now.”
Lilly had managed its own energy supplies for years and will just resume control again, she said. The Enron contract was part of an ongoing outsourcing program at Lilly.
National retailer J.C. Penney & Co. declined to say if the company is seeking an alternative to Enron. “We buy electricity from Enron today,” said Stephanie Brown, spokeswoman for the Plano-based retail chain. “Going forward we are monitoring the situation. It’s a complicated situation.” Brown said all stores had electricity service and the company was keeping close tabs on the situation.
A spokesperson for Houston’s Compaq Computer Corp. said the company is following the situation and “monitoring” any developments that could have an impact on its supply agreement with Enron. Compaq has a 5-year gas and power supply agreement with Enron for Compaq’s California, Massachusetts, and Texas facilities.