Early this year, the Robert Wood Johnson Health Network was boasting about a new five-year energy management contract that promised to save the system more than $4 million. The contract was with Enron Energy Services, a subsidiary of Houston-based Enron Corp., the world's largest energy trader, which last week filed for bankruptcy protection in New York.
It was the largest such filing in U.S. history, and Enron's trials conceivably threaten the electric and gas purchases for five of the seven hospitals in the New Brunswick, N.J.-based network. But the savings were too big to kill the deal over a mere bankruptcy.
"If I had to do it over again, and I knew they were going to stop in a month, I would do it all over again," said Andrew Greene, the network's chief executive officer.
The network has been in contact with Enron since news of the bankruptcy filing usurped the front pages of the nation's newspapers. Enron has assured Robert Wood that there would be no interruption in service, but the network is devising Plans B and C just in case, Greene said.
Four-hospital Continuum Health Partners, New York, is in the same boat. About one year ago, the system sealed an eight-year deal with Enron that promised to lop as much as 25% off its $20 million annual electricity bill.
"We can't breach the contract even though there are grounds, but I don't think we want to in any case," said Len Mellusi, corporate director of engineering at Continuum, which includes 992-bed Beth Israel Medical Center, New York. "It's a good contract."
Enron acts as a wholesale trader of energy on behalf of retail customers such as hospitals. In the first year, the Robert Wood Johnson network hospitals in total expected to save $650,000 with more savings promised after that, Greene said. Electricity packed the biggest wallop-$3.5 million less than what the hospitals used to pay to the regional utility, Public Service Electric and Gas. Last year, before the agreement, the five hospitals spent $5.4 million on electricity and $1.4 million on gas.
The network had begun shopping for a new energy provider when New Jersey deregulated the energy industry about two years ago, Greene said. A broker put Enron and the hospital network together. Enron set up each hospital with its own meter and billing system.
Mellusi observed that with their voracious 24-hour energy appetites, hospitals are attractive customers. But Enron was one of only a few suppliers that could meet Continuum's needs.
"They are very aggressive and do long-term hedging on energy. Other suppliers wouldn't go that far out," Mellusi said. "Our thinking was we wouldn't have to worry about electricity for eight years, which would give us more time to think about the clinical aspects of engineering."
Considering Enron has not been in regional markets very long, hospitals represent a fraction-less than 1%-of Enron's retail market, said Peggy Mahoney, an Enron spokeswoman. Other hospital customers include four-hospital Atlantic Health System, Florham Park, N.J., and 33-hospital Catholic Health East, Newtown Square, Pa.
"We are monitoring the situation with Enron, and details of the contract are confidential," said Sal Foti, a spokesman for Catholic Health East. Atlantic Health officials could not be reached for comment at deadline.
Mahoney said Enron continues to serve its customers and is working to ensure there will be no interruption in service. It wants to continue as an energy-management company, she said.
Continuum is rooting for Enron, too.
"From our point of view, we hope Enron can reorganize themselves under bankruptcy and continue serving us as they have served us," Mellusi said.