FERC judge OKs costly power deals for Nevada

Friday, Dec. 20, 2002 | 10:56 a.m.

An administrative law judge for the Federal Energy Regulatory Commission has rejected Nevada Power Co.'s effort to cut costs to customers on the grounds that the West's power markets may have been manipulated by suppliers.

Judge Carmen Cintron said Nevada Power's parent company, Sierra Pacific Resources Inc., Reno, failed to show that there were grounds to modify contracts Nevada Power and its sister company, Sierra Pacific Power, had with 10 energy suppliers and fuel providers.

Sierra Pacific Resources and the Public Utilities Commission of Nevada quickly responded that they were disappointed with the judge's ruling and noted that the entire matter would be taken to the full commission for consideration.

"It should be noted that this is not a final decision and it will now go to the FERC commissioners for further consideration and a final ruling in these proceedings," said Walt Higgins, chief executive officer of Sierra Pacific, in a statement issued Thursday after the judge issued her decision.

"The FERC is currently conducting an investigation into the possibility that there was price manipulation in the power marketplace during the 2000-2001 crisis that led to a dysfunctional market in the West," Higgins said. "This could well impact FERC's final decision since there already have been indictments and admissions by some power traders that manipulation of prices did indeed take place."

Jeff Parker, general counsel of the PUC, issued a similar statement.

"We are disappointed with the administrative law judge's decision; however, we will have the opportunity to submit additional comments to the FERC with respect to the decision and we're hopeful that FERC will reach a different conclusion more favorable to Nevada's electric utilities," Parker said. "Once FERC has issued its final decision, we will make a determination as to an appropriate legal course of action."

The commission's investigation is expected to be completed by spring with a final order anticipated in May.

"The Federal Power Act requires all power marketers, including those in the West, to charge just and reasonable rates," Higgins said. "After all of the FERC investigations are completed, we believe it will become very clear that the rates were not just and reasonable."

Sierra Pacific began renegotiating contracts when the company's credit rating slipped below investment-grade levels. The company's stock price fell when the PUC would not allow the company to pass $437 million in fuel and contracted power costs on to customers earlier this year.

The company has appealed the PUC decision in court in addition to filing the complaint with the FERC.

The company had more than 200 contracts with suppliers assuring Nevada consumers electricity for five years. The agreements were signed when electricity prices were high because of shortages, between Nov. 1, 2000, and June 20, 2001.

Sierra Pacific signed deals with Duke Energy Corp., units of Morgan Stanley Capital Group Inc., Calpine Corp., El Paso Corp., BP Plc, Mirant Corp., Reliant Energy Inc., American Electric Power Co., Enron Corp. and Allegheny Energy Inc.

Although Sierra Pacific said some suppliers priced power four times higher than they should have, those suppliers said the contracts were agreed to by both sides and should be honored by the company.

"The contracts were all standard products arranged through independent third-party brokers," Cintron said in a 116-page decision issued Thursday. "The evidence in this case does not show there was an 'excessive burden' on consumers."

The case had been combined with complaints brought by other utilities in California and Washington.

Experts have said that the outcome of several rulings involving rate manipulation allegations and rate case appeals would ultimately affect whether consumers would see a rate decrease filed for by Nevada Power earlier this year.