Enron motion on Nevada utilities considered

Friday, Sept. 6, 2002 | 11:06 a.m.

A federal bankruptcy judge is considering a motion by an Enron Corp. subsidiary that would require Nevada Power Co. of Las Vegas and a sister utility to post $307 million in collateral in connection with a lawsuit Enron filed against the utilities.

Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York said during a hearing Thursday that he will issue his ruling by next Thursday.

Enron Power Marketing Inc. of Houston filed a lawsuit in June against Nevada Power and sister company Sierra Pacific Power Co. of Reno after terminating an energy contract with the two utilities, which are subsidiaries of Sierra Pacific Resources.

Enron is seeking $307 million from the utilities, which was the estimated difference between the contract price the utilities were to pay for Enron's energy through this summer and current market prices for wholesale electricity. Enron said it had a right to terminate the contract because of the shaky financial condition of Sierra Pacific Resources and its Las Vegas and Reno subsidiaries, whose credit ratings have been given "junk" status by credit agencies.

But Sierra Pacific Resources Chairman Walt Higgins has maintained that his company does not owe Enron any money. Higgins, in fact, has said that the Western energy crisis that affected Nevada Power in 2000 and 2001 may have been caused in part by "questionable activities alleged to have been perpetrated by Enron and certain others."

Nevada Power spokeswoman Sonya Headen said the company is fighting attempts to post the collateral Enron seeks. But she said she did not know the effect it would have on Nevada Power's tenuous cash flow if the utility was forced to post the collateral.

"We just can't speculate," Headen said.

Nevada Power said it was placed in financial jeopardy after the state Public Utilities Commission ruled in March that the utility deserved only $485 million of the $922 million it was seeking from Southern Nevada ratepayers for energy used last year. The Southern Nevada Water Authority has since made an offer to buy Nevada Power.

Enron, the fallen energy giant, has financial problems of its own, having declared bankruptcy last year.