Enron doused island electric plant

Energy giant flexed all its muscle to win contract, backed out

April 03, 2002|By Walter F. Roche Jr. | Walter F. Roche Jr.,SUN NATIONAL STAFF

SAIPAN, Northern Marianas - The persistent power outages that trouble this Pacific island were supposed to become a thing of the past. That was the promise Enron Corp. made after it used its political influence to elbow aside a Japanese competitor to win a contract to build a $120 million power plant here two years ago.

But after enlisting the political support of U.S. Rep. Tom DeLay - the Texas Republican who is the House majority whip - the now-bankrupt Houston energy company backed out of its commitment, citing a change in corporate strategy.

And so the lights keep flickering and the appliances keep conking out, especially in the early evening hours.

"There was all kinds of political interference," said Vicente N. Mesa, power division manager of the Commonwealth Utilities Corp., the utility serving the Commonwealth of the Northern Marianas, a U.S. territory of 14 neighboring islands.

Though it has its own legislature and government, the Marianas are subject to U.S. laws.

"It was the typical Enron take-charge attitude," said Timothy P. Villagomez, who stepped down as CUC executive director two months ago. "It was a real learning experience for me."

Villagomez recalled how he came under personal attack after opposing Enron's bid. The contract was about to go to a competitor, Marubeni Corp. of Japan, when Enron supporters widely distributed an affidavit from Villagomez' ex-wife accusing him of being unduly influenced by Marubeni for the power plant contract.

Marubeni officials and Villagomez denied the charges, and a subsequent investigation by the Marianas attorney general concluded the charges were "baseless."

According to Villagomez, it was Enron, not Marubeni, that attempted to influence him.

Recalling a scene during a negotiating session in a Houston skyscraper, Villagomez said he was told by an Enron official that he could have whatever seat he wanted for that evening's game in the Astrodome. He said he turned down the offer.

Enron spokesman John Ambler said last week that the company efforts were not undertaken to exert undue influence but to ensure "the selection was an open and impartial selection process." He said those Enron officials involved were no longer with the company.

Besides DeLay - Enron's hometown congressman - the utility firm also enlisted the aid of U.S. Rep. Helen Chenoweth-Hage, an Idaho Republican.

Chenoweth-Hage, in a letter to Commonwealth Utilities officials in early 2000, threatened that the company would be subjected to a federal investigation if it attempted to shunt aside the Enron bid to finance, build and run the 80-megwatt, gas-fired power plant.

Chenoweth-Hage, who retired and now lives in Nevada, declined to comment when asked what prompted the letter.

DeLay did his part by writing on behalf of Enron to key Marianas officials. He was asked to do so by his former chief of staff, Edwin A. Buckham, who had been hired as an Enron lobbyist. A Marianas legislator allied with Enron subsequently introduced a bill that Villagomez said effectively forced Commonwealth Utilities to grant Enron the contract.

The bill was approved and signed into law by then-Marianas Gov. Pedro P. Tenorio. The utility's board voted 3-2 on May 26, 2000, to give Enron the contract.

Lobbying reports filed with Congress for 1999 by Buckham's firm, the Alexander Strategy Group, list "Saipan power" as one of the issues being pursued on behalf of its client, Enron Corp.

DeLay spokesman Stuart Roy confirmed the letter was sent but said the purpose was not to favor Enron, but rather to "make sure it was a fair and open process."

Campaign finance reports show DeLay's re-election committee has received $28,900 from Enron and its officials since 1989.

After aggressively seeking the contract, Enron pulled out of the deal, leaving the commonwealth without a new power plant. Enron officials said the company had decided "to pursue a different business strategy."

While Villagomez and others concede the commonwealth still needs to augment its power supply, they stress that given the current economic conditions, a new $120 million power plant would have been a "disaster."

"It would have been a very bad thing," said Mesa, the Commonwealth Utilities executive, adding that the final price tag would have been in excess of $150 million. Bond interest costs, Mesa said, would have pushed the total cost over 25 years to $336 million.

Under Enron's proposal, it would have obtained the financing but wanted the Marianas government to give its "full faith and credit" backing to the bonds. With the current bankruptcy, that could have left the Marianas government responsible to bondholders.

Like Villagomez, Mesa said the political pressure for the Enron deal was intense.

"There were all kinds of political pushes from the top and the side and every way. There was all kinds of political interference," he said.

At hearings called by Marianas legislators, Mesa said, the politicians only pretended to be interested in the history and details.

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