Nevada Power testing the waters for Enron-driven rate hike

Friday, Nov. 28, 2003 | 11:06 a.m.

CARSON CITY -- Nevada Power Co. has asked the state Public Utilities Commission whether it can now file an application to increase rates for customers in Clark County to recover a $235 million judgment against the utility by Enron Corp.

U.S. Bankruptcy Judge Arthur Gonzalez of New York ruled that Nevada Power must pay that amount to Enron for a cancellation of a contract for power. The judge also approved a $103 million judgment against Sierra Pacific Power Co., of Reno, the sister company of Nevada Power.

Gonzales ordered the utilities to deposit securities totaling $338 million to cover the judgment and $35 million in cash within 90 days in an escrow account while the two companies file an appeal of his order to the U.S. District Court.

The bankruptcy judge also ordered the two utilities to determine if they could now seek authority from the PUC to recover all or part of the judgment from their customers.

Attorneys for Nevada Power told the bankruptcy judge they did not think ratepayers could be charged until the case was completed. But Gonzales in his order directed the two utilities to ask the PUC if a rate case could go forward.

State Consumer Advocate Tim Hay said Wednesday he would oppose any recovery from ratepayers for the Enron judgment. He said neither utility received any power from Enron and the consumers should not be saddled with those costs.

Hay said this new petition comes at a time when Nevada Power is already seeking to increase rates in Clark County that he predicts will total $809.6 million.

He said the utility wants to boost rates by $432.9 million over three years in a general rate case. And it wants to recover $344.8 million in deferred energy costs to recoup money spent on higher energy costs. It also wants to recover $31.8 million for expenses in developing its resource plan.

If the utility is able to recover the full $809.6 million, Hay said that would result in an average increase of 16.6 percent. A typical bill would go from $91.93 to $107.21, he said.

In filings with the PUC, Nevada Power said it's general rate case will raise $142 million over the next two years. The deferred rate case, utility filings said, will raise $93 million to recover past fuel and purchased power costs and another $80 million to meet high ongoing costs for fuel and electricity. Following the direction of Gonzales, utility General Counsel C. Stanley Hunterton and Associate General Counsel Elizabeth Elliot filed a request with the commission Nov. 21 for a declaratory order asking if the utility would be able to file a rate case now to recover the Enron judgment.

The PUC has already approved a request from Nevada Power and Sierra Pacific Power to issue $338 million in debt as collateral for the bankruptcy court judgment while the appeal is processed. It must now decide if two utilities can file rate cases.

The dispute between the Nevada utilities and Enron was over power purchase contracts that were cancelled by Enron in May 2002. Enron took the action after Sierra Pacific Resources, the parent company of the two companies, had its credit rating reduced to junk status.

The Nevada companies say Enron violated market rules when it terminated the contracts and when it refused to deliver the agreed to power.

The Federal Energy Regulatory Commission ruled in June the contracts were valid despite market manipulation during the energy crisis in the West that drove prices higher. The bankruptcy court handling the Enron case agreed with the federal agency, awarding $336 million in termination penalties and interest against the Nevada utilities.

Meanwhile the PUC has a consumer session scheduled in Las Vegas for Thursday at 1 p.m. at the Clark County Library, Flamingo Branch (1401 East Flamingo Road). The session is not scheduled for any particular case but for the PUC to hear the concerns of utility customers in general.