CASE STUDY
Enron Bankruptcy

Everyone in the energy business remembers December 2, 2001. This was the day that Enron filed for bankruptcy in the Bankruptcy Court in the Southern District of New York, and in the process shook the foundations of the energy industry and indeed all of corporate America.

On the day that Enron declared bankruptcy, Competitive Energy Services had over 600 commercial and industrial customers in Maine with retail electricity supply contracts through Enron Energy Services, Inc., the retail marketing affiliate of Enron. These contracts represented approximately 25% of the total commercial and industrial electricity load in the State of Maine, and included clients ranging in size from 25 kW to 25 MW and contracts of between 12 and 60 months duration.

In the weeks immediately prior to Enron's bankruptcy filing, CES began to become concerned about Enron's financial strength and its ability to honor these contracts. We repeatedly sought and received both written and oral statements of Enron's financial condition from its corporate officers that unequivocally stressed Enron's ability and commitment to honor these supply contracts. 

Despite such assurances, however, CES undertook certain actions to protect our clients from a failure of Enron. Thus, when Enron declared bankruptcy: CES had an alternative supplier ready to step in, if necessary, to continue service, and therefore protect clients from exposure to financial penalties they might incur by falling back onto Standard Offer Service in Maine. 

CES immediately retained bankruptcy counsel in New York and Maine and began the process of representing our clients at no cost to them in the bankruptcy proceedings.

Throughout the next six months, CES managed a constant flow of information between the courts and our clients. We published weekly updates and special announcements on our web site to keep our clients informed about the court proceedings and any issues that may affect them. In addition, we worked very closely with the Maine Public Utilities Commission to ensure that our clients were not unfairly disadvantaged by any unilateral termination of their contracts by Enron, or if the opportunity presented itself during the bankruptcy proceedings, by the clients themselves. 

Finally, when it became clear that Enron intended to sell the contracts of our clients through an auction, we acted on behalf of our clients to negotiate (voluntary) replacement contracts for our clients with Constellation Power Source, the supplier that won the auction. These replacement contracts were at reduced prices that resulted in a total savings to our clients over the life of these contracts of more than $9 million. In addition, we negotiated the payment of a variety of outstanding Enron debts to our clients, including the return of security deposits.

Our ability to make a success out of this difficult situation is a reflection of our dedication to the interests of our clients, the scale of our operations, and the talents of our people.