By Robert Salonga
Daily Bruin Staff
The University of California signed with Phoenix-based APS
Energy Services last week, ending its ties with Enron Corp. as its
primary energy supplier.
APS will power seven of the 10 UC campuses as well as 19 of the
23 California State University campuses. UC Riverside and UCLA, who
receive power from local sources, such as the Los Angeles
Department of Water and Power, will not be affected by the
signing.
For the past four years the UC has contracted with Enron for
direct power access, but the university was concerned about the
contract’s stability after Enron filed for bankruptcy last
December.
“This agreement … will be extremely advantageous to the
universities compared with other alternatives,” said Joseph
Mullinix, UC senior vice president for business and finance in a
statement.
The UC had an opportunity to extend its contract with Enron
““ which expired March 31 ““ by two years, but opted to
deal with APS instead.
In January, university counsel Lloyd Lee said the deal with
Enron was a “very advantageous contract,” with the UC
receiving energy at 6.9 cents per hour and that a new contract
could cost the UC millions of dollars. The rates of the APS
contract were not disclosed.
Some hope the APS agreement will reduce costs in tough financial
times for the state.
“With the pressures on the state budget, saving funds
where we can is very important,” said Richard West, CSU
executive vice chancellor and chief financial officer.
In his first state budget proposal, Gov. Gray Davis notified
state agencies to prepare for up to a 15 percent cut in their state
budgets to account for an approximate $12.5 billion shortfall.
Larry Hershman, UC vice president for the budget, said at the March
UC Regents’ meeting that Davis underestimated the state
deficit by up to $5 billion.
Re-signing with Enron might have been a conflict of interest for
the UC, which now leads a class-action suit against Enron and its
auditor, Arthur Andersen LLP, representing more than 100
plaintiffs.
Enron executives allegedly released false financial statements
to inflate stock prices, and senior members cashed nearly $1.1
billion in stock before the company met financial doom. The UC lost
$145 million as a result, accounting for 0.3 percent of its
investment portfolio.
Among the hardest hit by the stock fall were the Florida State
Pension Fund ($325 million), Georgia State Prison Fund ($127
million), Ohio Public Employees and Teachers ($114.5 million) and
the New York city pension plan ($110 million).
Ironically, Enron placed fifth on Fortune magazine’s
upcoming list of America’s 500 biggest companies despite its
downward spiral, according to the Associated Press.
Fortune noted that the company benefited from the fact that,
like other energy traders, it was allowed to include trading
contracts in its revenues. Other energy trading firms also advanced
in the rankings.