Enron once had big plans in Nevada

Thursday, Nov. 29, 2001 | 10:41 a.m.

Nevada was once in Enron Corp.'s plans to sell power and gas in newly deregulated markets.

But when the state put the brakes on deregulation, the beleagured Houston-based energy company changed plans and sold a North Las Vegas power plant it had just acquired. And, in its short-lived effort bid to serve large customers, the company signed a long-term supply contract with casino giant Harrah's Entertainment Inc. of Las Vegas.

The Public Utilities Commission of Nevada licensed Enron to do business in the state in October 1999. At the time, several companies were gearing to enter what was expected to be a deregulated energy marketplace in Nevada in early 2000.

Enron officials said they had no plans to offer gas or electricity to residential users, but did want to serve large commercial and industrial customers.

To prepare for that, Enron acquired a power plant and was considering deals on others. Enron North America Corp. and Southwest Power LLC, both Enron affiliates, acquired Las Vegas Cogeneration LP and SUNCO Ltd., the holding companies that owned the $75 million gas-fired 50-megawatt plant, from United Co., Bristol, Va.

Terms of that deal were not disclosed. United had interests in oil and gas, roof supply distribution, golf operations and real estate.

The plant, at 1701 E. Alexander Road, is capable of producing 210 million kilowatt hours of electricity, enough to power about 30,000 homes for a year. United sold power to Nevada Power Co. during peak demand periods when it owned the plant.

In August 2000, Enron tried to convince the Nevada Commission on Economic Development to approve tax incentives for a $120 million plant expansion. The request was rejected.

When it became clear the deregulation wasn't going to occur in Nevada, Enron sold the North Las Vegas plant. Black Hills Energy Ventures, a subsidiary of Black Hills Corp., Rapid City, S.D., closed on the deal in August. Terms of the acquisition were not disclosed.

Black Hills serves customers in western South Dakota, northeastern Wyoming and southeastern Montana.

Enron's five-year supply contract with Harrah's provides natural gas and electricity to 16 hotel-casinos in seven states, including the company's operations in Nevada, and doesn't actually begin until June 2003.

Harrah's spokesman Gary Thompson said the contract was drafted that way because Harrah's speculated that energy prices would decline in the short term and the company could get cheaper power on the spot market. But the five-year deal locked in a stable price to cover Harrah's casinos, which account for about 75 percent of the company's $40 million annual energy bill.

Thompson said Enron's woes "will have virtually no impact at all on (Harrah's) financially." He explained that if Enron files for bankruptcy protection and reorganizes its finances, it would continue to supply customers power. However, if the company were to liquidate, Harrah's would get energy from other suppliers on the spot market, just as it does now.

Officials with Nevada Power, which purchases some of its spot market power from Enron when it doesn't have enough to meet summer peak needs, also aren't concerned if the company buckles.

Spokeswoman Sonya Headen said Nevada Power usually doesn't have to buy spot power in the winter months since the state's power grid is taxed the most in the summer, when air conditioners are running. Headen said other major utility companies, like Duke Energy and Dynegy, have "stepped up to the plate" when electricity is in short supply, so the company isn't expecting Enron's troubles to affect local customers.