Monday, April 7, 2003 | 10:58 a.m.
Nevada Power Co. of Las Vegas and its parent company, Sierra Pacific Resources, have filed two lawsuits against three energy suppliers, seeking hundreds of millions of dollars in damages in one case and protection from a $25 million claim in another.
Nevada Power is seeking $850 million from Merrill Lynch and Allegheny Energy. The Las Vegas utility is claiming the companies provided "false and fraudulent evidence" to the Nevada Public Utilities Commission, resulting in the disallowance of $180 million in its 2002 rate case.
In the rate case, the PUC threw out nearly half of the $922 million the utility was seeking to recover for the cost of fuel and purchased power to serve customers during 2001. That disallowance included $180 million for a contract it never entered with Merrill Lynch in 1999, the suit said.
Nevada Power added that Merrill Lynch "lacked the competency, capacity, or the intention to perform the proposed offerings," the suit said.
Allegheny Energy acquired Merrill Lynch's energy trading operations for $605 million in March 2001.
That lawsuit claims breach of fiduciary duty, breach of contract, conspiracy and racketeering.
"There is absolutely no basis for Sierra Pacific Resources to hold us responsible for the state's decision," said Bill Halldin, spokesman for Merrill Lynch. "This lawsuit is over a transaction they decided not to complete, and that's ridiculous."
Allegheny spokeswoman Janice Lance said the suit is "without merit," and emphasized that it involves a proposal made prior to that company acquiring the Merrill Lynch operations.
In a separate suit, Nevada Power is seeking protection from a $25 million claim by Morgan Stanley Capital Group Inc.
Morgan Stanley terminated an electricity supply contract with Nevada Power in May, demanding a $25 million termination payment from the Las Vegas Utility, said the suit filed last week in U.S. District Court.
The demand for payment came after Morgan Stanley asked for a $24 million letter of credit just weeks after the PUC ordered the $435 million disallowance in Nevada Power's 2002 rate case. The ruling caused credit-rating agencies to slash Nevada Power's credit and plunged the company into financial turmoil.
In the suit, Nevada Power is asking the court to set aside Morgan Stanley's $25 million claim. The suit said Morgan Stanley was unjustified in terminating the contract for events set off by the "uncontrollable forces" caused by the PUC's decision.
Nevada Power spokeswoman Sonya Headen said the company would not comment on pending court cases.
"We believe they owe us money pursuant to the contracts," responded Mark Lake, a spokesman for Morgan Stanley. He added that the matter has previously been in arbitration, a process that ended without resolution.
Meanwhile, Nevada Power is waiting for a ruling from the Federal Energy Regulatory Commission on a request to throw out $300 million in contracts with nine suppliers, including Morgan Stanley. Nevada Power has argued that those contracts were inflated because of manipulation of the Western power market.
In the lawsuit, Nevada Power has asked that, if the court will not throw out Morgan Stanley's claims, they be "stayed pending the determination by the Federal Energy Regulatory Commission as to the justification for and reasonableness of the charges in the transaction."
Bankrupt Enron Corp. has made claims similar to Morgan Stanley's, seeking $216 million from contracts it terminated with Nevada Power. It also is seeking $93 million from contracts terminated with the utility's sister company, Sierra Pacific Power. That case will be decided in U.S. Bankruptcy Court.
Nevada Power also is waiting for a District Court ruling in Carson City, seeking the reinstatement of the $435 million disallowed by the PUC.
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