Nevada Power may benefit from new Enron investigation

Kevin Rademacher

Friday, Feb. 21, 2003 | 11:11 a.m.

A federal investigation into Enron Corp.'s involvement in two Las Vegas-area power plants could pay off for Nevada Power Co.

The Federal Energy Regulatory Commission (FERC), which had been been investigating Enron's involvement with wind-powered plants in California, has now turned its sights on the bankrupt power trader's ties to power plants called Las Vegas Cogeneration LP and Saguaro Power Co.

Both plants sold long-term, wholesale energy contracts to Nevada Power as "qualifying facilities," a regulatory designation specific to small power facilities, in the early 1990s.

In the draft order initiating the investigation, FERC stated that "it has come to the attention of the commission that Enron appears to have improperly retained (qualifying facility) benefits for its facilities."

According to FERC definitions for qualifying facilities, "a cogeneration facility or small power production facility may not be owned by a person primarily engaged in the generation or sale of electric power (other than power solely from cogeneration facilities or small power facilities)."

Congress established the qualifying facilities category with the Public Utilities Regulatory Act of 1978 as a means of encouraging investment in smaller power plants. The rules required utilities, such as Nevada Power, to purchase power from such small facilities at a higher-than-usual wholesale rate.

Saguaro Power Co. operates a 105-megawatt facility in Henderson. Las Vegas Cogeneration operates a 50-megawatt facility in North Las Vegas.

Enron North America Corp. purchased Las Vegas Cogeneration in 1999, selling it to Black Hills Energy Co. in 2001.

According to FERC, Enron North America also loaned money to Boulder Power LLC. Those funds, FERC claims, were used to finance the purchase of a 15 percent stake in Saguaro Power.

"It appears that Enron affiliates may control and/or may have controlled Saguaro and LVCLP (facts, we note, that were not disclosed in the filings made with the commission)," the FERC order stated.

As such, both plants could lose their qualifying facility status, voiding all or part of the Nevada Power contracts.

While Nevada Power may not have been over-charged, the FERC complaint suggests that Enron improperly benefitted from higher wholesale rates meant to benefit small power companies.

Could Nevada Power lose in the investigation?

"It doesn't sound like it," said Connie Westadt, assistant general counsel for the local electric company. "It looks like we will maintain the status quo, see a refund or gain the ability to renegotiate the contracts."

Tim Hay, state consumer advocate and chief deputy attorney general, said the FERC investigation is a welcomed move and illustrates the ties between Nevada and Enron.

"It does appear to be a very intricate web Enron spun here in terms of business dealings in Nevada and with the state's utilities," he said."Ultimately, it is affecting Nevada consumers."