Enron Related Problems Not Over Yet

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The Palo Alto City Council is debating whether the city’s budget should be amended to reflect the agreement to pay $21.5 million to Enron. The settlement, which contributed to utility rate increases, concludes a story begun in 2001. The story, and Palo Alto role it, has primarily been told behind closed doors.

Palo Alto entered the story when the city, along with ten other communities in the Northern California Power Agency (NCPA), formed an alliance with the energy giant to manage the agency’s power supply and sales. At the time, the agreement was heralded as a first-of-its-kind alliance that would allow smaller municipal agencies like the NCPA to compete with larger utility after deregulation occurred. Palo Alto pulled out of the agreement just before Enron collapsed and the company sued.

Referred for confidential mediation and under a gag order by a New York judge, the discussions and negotiations leading to the settlement have occurred in closed council sessions. Although some residents are unhappy that they weren’t made aware that the city was close to a deal until the settlement was announced, open government advocates say no laws are violated as long as the public is given access to all the records once the settlement is complete. The mayor agrees.

“The public has to trust,” Palo Alto Mayor Jim Burch told the Mercury News. “If and when the whole story is told, I hope it will be obvious to everyone it was the right thing to do.”

According to the Mercury News, the settlement will tap the city’s cash reserves, forcing them below the minimum required levels. It has also partly responsible for rate increases of approximately $6 a month for the average homeowner. The rate increases will take effect in July.

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