ACN Energy Denied Financing 

ACN Energy is an unregulated ESCO allowed bythe NY PSC to sell natural gas and electricity in New York without following the Home Energy Fair Practices Act.

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Judge rules in favor of Aquila in utility case - DAN MARGOLIES  - Kansas City Star - 10-30-02

-A federal judge has refused to order an Aquila Inc. subsidiary to guarantee gas purchases for an energy marketer that serves 85,000 customers in eight states and Washington, D.C.

U.S. District Judge Howard Sachs on Tuesday denied a preliminary injunction request by ACN Energy Inc., a retail electricity and natural gas provider based in McLean, Va.

ACN had claimed that unless its request was granted, it would "promptly" go out of business.

Sachs, however, ruled that marketing agreements between ACN Energy and Aquila Merchant Services Inc. gave Aquila absolute discretion to determine whether to provide the guarantee sought by ACN.

"The parties could not have chosen stronger language reserving to Aquila the right to say `no' to new business commitments of this nature," Sachs said. The case marks the latest example of fallout from Kansas City-based Aquila Inc.'s announcement earlier this year that it would exit the wholesale energy trading business and return to its roots as a utility holding company. As part of that process, Aquila has already eliminated about 1,500 jobs and sold off assets to bolster its finances.

ACN Energy, a subsidiary of network marketing company ACN Inc. of Farmington Hills, Mich., sought the injunction when it sued Aquila Merchant Services on T-hursday in federal court in Kansas City.

ACN Energy is a retail aggregator of electricity and natural gas, drawing on its far-flung representative network to sell energy to residential and small-business customers.

In its lawsuit, it asserted that Aquila Merchant Services had reneged on agreements to provide it with credit backing needed for ACN Energy to purchase gas from a third company, Reliant Energy Services Inc.

Under the agreements, Aquila Merchant Services agreed to provide ACN Energy with credit guarantees and loans. Because Aquila had investment grade debt ratings from credit rating agencies and privately held ACN did not, the guarantees and loans enabled ACN Energy to buy energy under normal credit terms.

Aquila Merchant Services maintained that it told ACN Energy in March that it was getting out of the energy trading business and that ACN Energy should find other sources of funding. Aquila also noted that ACN had already defaulted on more than $2 million in Aquila loans.

"If forced to continue to serve as ACN's sole financial stronghold, (Aquila Merchant Services) also will find itself in an economically tenuous situation by June 30, 2003," when the agreements with ACN Energy expire, Aquila said.

Sachs agreed, stating that while the balance of hardships might have tipped in favor of ACN Energy, "what is called a rescue operation sometimes results in the drowning of both swimmers, rather than only one."

A spokeswoman for ACN Energy, ACN Inc. marketing director Diane Sacra, declined to comment Tuesday.

ACN Inc. bills itself as one of the fastest-growing privately held companies in the country. The network marketing company was founded in 1993 and recruits thousands of people to sell its products -- which include long-distance, Internet and utility services -- directly to customers. ACN Energy offers utility services in California, Georgia, Maryland, New York, Ohio, Pennsylvania, Texas, Virginia and Washington, D.C. In June, it settled charges by Pennsylvania utility regulators that it had "slammed" 19 electricity customers, or switched them from their utilities without authorization. The company agreed to pay a $15,000 fine and $30,000 for the overcharges.

ACN Energy lost $1.6 million in 2000 and $18.4 million in 2001, according to the financial statements of its parent, ACN Utility Services. ACN Energy first contracted with Aquila Merchant Services in July 2001. At the time, ACN chief executive John Huffman said that the company anticipated "a long, healthy and prosperous relationship with Aquila."

For more news or to subscribe, please visit <http://www.kansascity.com> "If forced to continue to serve as ACN's sole financial stronghold, (AquilaMerchant Services) also will find itself in an economically tenuoussituation by June 30, 2003," when the agreements with ACN Energy expire, Aquila said.

Sachs agreed, stating that while the balance of hardships might have tipped in favor of ACN Energy, "what is called a rescue operation sometimes results in the drowning of both swimmers, rather than only one."

A spokeswoman for ACN Energy, ACN Inc. marketing director Diane Sacra, declined to comment Tuesday.

ACN Inc. bills itself as one of the fastest-growing privately held companies in the country. The network marketing company was founded in 1993 and recruits thousands of people to sell its products -- which include long-distance, Internet and utility services -- directly to customers.

ACN Energy offers utility services in California, Georgia, Maryland, New York, Ohio, Pennsylvania, Texas, Virginia and Washington, D.C. In June, it settled charges by Pennsylvania utility regulators that it had "slammed" 19 electricity customers, or switched them from their utilities without authorization. The company agreed to pay a $15,000 fine and $30,000 for the overcharges.

ACN Energy lost $1.6 million in 2000 and $18.4 million in 2001, according to the financial statements of its parent, ACN Utility Services.

ACN Energy first contracted with Aquila Merchant Services in July 2001. At the time, ACN chief executive John Huffman said that the company anticipated "a long, healthy and prosperous relationship with Aquila."