Army Privatizing Energy

The new Army secretary is pressing to speed efforts to let private contractors run utilities on military bases as the energy company he recently left seeks millions of dollars from the Pentagon for providing just such services.

Army Secretary Thomas White has said he would remove himself from decisions involving Enron Energy Services, where he served as vice chairman until this year, if there was a clear conflict of interest.

White, a former brigadier general, is consulting with lawyers on whether he should participate in decisions related to Enron, the Houston-based energy conglomerate whose chief executive officer, Kenneth Lay, is close to President and was a major contributor to the Bush campaign. White also is in the process of selling $25 million in Enron stock, the Army says.

For the last two years, the Pentagon has been seeking to save money by hiring companies with energy expertise to run the electric, natural gas and other utilities on military bases. White said last week that he was frustrated by the program's slow pace and wanted to see it accelerated.

"I see no reason whatsoever why the Army is in the energy business," White said. "It's a stupid business practice for the Army to be running itself that way."

Enron already has won one such contract and has a bid pending to run utilities at several Texas bases.

A military ethics expert questioned White's decision to raise the utility issue so soon on the job.

"When you have that interest in the past, to bring that up as the very first thing, I don't think that was a very smart move on his part because, again, it brings that appearance of conflict," said former Army Maj. Jeffrey Whitman, an ethics professor at Susquehanna University in Selinsgrove, Pa.

Whitman said White should recuse himself if there is a clear conflict of interest as defined by federal law — and in any case will have to tread carefully on Enron issues. "It certainly gives the appearance of a conflict of interest, and oftentimes in situations like this appearances can become reality," he said.

White House spokeswoman Claire Buchan said Bush and the staff involved in White's nomination were unaware Enron was seeking Army contracts.

Buchan said she was confident White is working with counsel "to ensure that he is in full compliance not only with the letter of the ethics laws but with the spirit of them."

Enron has a bid pending to run utilities at seven Air Force bases, a naval base and the Army's Fort Bliss in Texas, company spokeswoman Peggy Mahoney said.

"The federal government is one of the largest users of energy and so we continually look for ways to offer a product for them," she said.

As for White, she said: "We don't anticipate working with him on these issues at all. It's a very public process and the proposal will stand on its own or not. It's not his decision ultimately. It's base by base."

In 1999 White, then at Enron, played an active role in the company winnina $25 million, 10-year contract to run natural gas and other utilities at the Army's Fort Hamilton in Brooklyn, N.Y. Enron helped the Army rebuff a lawsuit that challenged the military's right to hire contractors in stead of local utilities.

Enron was passed over for utility contracts at the five Washington, D.C.-area bases involved in the lawsuit. The Army awarded the contracts at two bases to Enron competitors and has reopened bidding on the other three.

The Army used to run all base utilities and had to pay for repairs or upgrades.

But in December 1998, the Pentagon ordered each service to hire companies to take over base utilities, where appropriate, by September 2003. Of 320 Army utility systems in the United States, 49 are run by private contracts and dozens more are up for bids. Several bases have been exempted for security reasons or costs.

Besides Enron, other companies running base utilities include Northern States Power Co. at Wisconsin's Fort McCoy, Washington Gas and Light Co. at Fort Detrick in Maryland and Oklahoma Natural Gas and Light Co. at Oklahoma's Fort Sill.

While Enron has the Texas bid pending, it says it has stopped submitting new offers while it awaits decisions from the Defense Department on various contract-related issues.

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