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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.