FERC ruling may add weight to Nevada utilities’ federal cases

Kevin Rademacher

Thursday, March 27, 2003 | 11:19 a.m.

The Federal Energy Regulatory Commission's report outlining extensive manipulation of the Western power market may advance claims alleging manipulation filed by Nevada Power Co. of Las Vegas and its sister company Sierra Pacific Power of Reno.

Those claims seek to modify or abandon long-term contracts with nine suppliers signed amid market turmoil in late 2000 and early 2001. The balance of the Nevada Power contracts totals about $300 million, spokesman Jack Leone said.

Consistent with Nevada Power's claim, the report said, "Market dysfunction in California short-term markets affected long-term contracts."

Despite the investigation's findings, a ruling in the Las Vegas utility's favor is not guaranteed. FERC was scheduled to hear the claim following the release of the report Wednesday, but after a brief discussion, the commissioners delayed their vote.

Before that delay, however, two of the three commissioners and their legal staff indicated that the contracts should be upheld, said a FERC spokesman.

Steve Boss, president of the Nevada Energy Buyers Network, said such a move would be awkward following the release so much evidence of manipulation.

"It is strange," he said.

Leone emphasized that a verdict has not been made on those those contracts. He maintained the new evidence of manipulation still could swing FERC's final ruling.

"While no final decisions or conclusions have been reached ... we feel the findings could result in positive developments for utility customers throughout the state," Leone said.

"If you work in a dysfunctional marketplace, it affects everything around you," he added. "The people of Nevada were victimized by that."

In December, FERC administrative law judge Carmen Cintron upheld the same contracts, saying Nevada Power failed to prove an excessive burden on consumers.

Nevada Public Utilities Commission Chairman Don Soderberg maintained optimism Wednesday.

"In these proceedings, the (PUC) has supported the position advanced by Nevada's electric utilities that market dysfunction in California short-term markets affected long-term contracts," Soderberg said. "It is encouraging that the analysis contained in the report released today by the FERC staff supports this position."

Boss and Nevada Consumer Advocate Tim Hay said the acknowledgement of market manipulation could tilt the scale on a pending bankruptcy court case between Nevada Power and Enron. The embattled energy trader is seeking $300 million from a terminated contract with Nevada Power.

"This presumably could help (Nevada Power)," Boss said. "It's changing the light in which the bankruptcy court looks at things."

But it will be some time before the full affect of Wednesday's ruling is felt in Nevada.

"I think it's going to take awhile functionally for the impacts of what no doubt are going to be complicated decisions really to be analyzed and determined," Hay said. "One thing that may be is a little bit clearer today than it was, not only FERC but the players in the marketplace have essentially acknowledged that the California marketplace was subject to abuse."

In its report on market manipulation, FERC also ordered Sierra Pacific Power and 36 other entities to answer questions about some energy trades.

Leone said the transactions in question total just $6,300.

But Hay said that inquiry could weaken Nevada Power's position in a $195 million rate hike case that will be heard by the state Public Utilities Commission. Hay's office is seeking a $292 million reduction in rates based on allegedly imprudent business practices.

"We are going to be able to make a strong demonstration that the company's own conduct certainly exacerbated the dilemma that they found themselves in with power costs," he said.