Owens Corning has agreed to buy $1.1 billion worth of electricity and energy management services for 20 manufacturing plants from Enron.
Enron is guaranteeing that it will provide Owens Corning with savings of at least $60 million over the next decade, in addition to the savings to be gleaned from falling rates in states with deregulated markets.
Through the agreement, Enron will: l Supply and manage all energy commodity requirements; l Mitigate risks of price volatility; l Design, build and finance some energy infrastructure projects.
The 10-year contract may be a harbinger of more deals. Owens Corning and Enron will share the savings, the majority going to Owens Corning. Like many heavy energy users, Owens Corning gets lower rates in exchange for tolerating service disruptions during energy crunches. This agreement cost it $500 000 over a 4-day period when it was forced to pay market rates during a price spike, wiping out the savings made from the interruptible power contracts. As a result, it decided to accept this deal, whereby price protection was provided by Enron.
Enron and Owens Corning intend to renegotiate the terms of the interruptible power contracts with local utilities and but generators to supply backup power for periods when the cost of buying power on the marketplace is excessive.
Enron hopes other companies will seek similar protection. In a similar deal, Enron has signed a $1.5 billion deal to manage the electricity and gas requirements of Simon Property Group for ten years.