Enron execs press Nevada case

Kevin Rademacher

Wednesday, Oct. 22, 2003 | 11:14 a.m.

Executives from Enron Corp. continue to make their case for settlement talks in an increasingly heated contract dispute with Sierra Pacific Resources and its subsidiary utilities Nevada Power Co. and Sierra Pacific Power Co.

Enron officials visiting Las Vegas on Tuesday accused Sierra Pacific of refusing to negotiate a resolution in the case that has twice been decided in favor of the bankrupt Houston-based company.

Last month, a U.S. Bankruptcy Court judge ruled that Sierra Pacific owes $336 million in termination penalties and interest for contracts terminated in May 2002 after Sierra had is credit rating slashed after a $437 million regulatory expense-recovery disallowance.

"It's not in anybody's best interest to continue this fight," said Brandon Wax, vice president of Enron North America who executed the disputed contracts. "I will settle for something less than my judgment."

Wax said an offer had been forwarded to Sierra Pacific. But Walter Higgins, Sierra Pacific CEO, disputed that claim.

"I'd like to see them produce the letter, since I've never seen a letter and no one on my staff has seen it," he said. "We have never seen a written offer to settle."

Higgins said the only settlement numbers he's ever heard spoken are 90 cents on the dollar or more, a number he said is "completely unreasonable," adding that Sierra has no plans to pursue settlement talks.

Since the bankruptcy court handed down its final order in September, Sierra Pacific has appealed to the Federal Energy Regulatory Commission, claiming that Enron violated market rules when it exercised a termination clause in the contracts.

That's despite the fact that, in June, FERC upheld the contracts, saying that the deals were legitimate despite manipulation in the market during the Western energy crisis that drove up prices.

On Thursday, the state Public Utilities Commission will decide whether the utilities can issue debt in order to post a bond to stay the execution of the $336 million judgment while it's appealed.

Mark Palmer, a spokesman for Enron Corp., said the appeals process will just increase Sierra Pacific's legal and interest costs.

Enron executives, who have criticized the Nevada companies for characterizing their company as a criminal entity, also accused the Nevada utilities of making their own attempt to take advantage of market conditions during the Western energy crisis.

"They were buying way more power than they needed to serve their load," Wax told the Las Vegas Sun Editorial Board on Tuesday.

Palmer said the companies were looking for a quick profit.

"They made a financial decision," he said. "They thought they could buy power and sell it at higher prices."

Higgins responded sharply to the claims.

"It's an outright lie, a full fabrication by Enron," he said. "It's a lie and I'll say it to their face."

Higgins said the company has always sold off unused power to offset the costs of purchasing power, but the company didn't buy power for the sole purpose of selling it off, he said.

In filings with the U.S. Securities and Exchange Commission, Nevada Power Co.'s wholesale power dealings increased sharply from 1998 to 2001. In 1998, wholesale transactions were just 4.5 percent of the company's megawatt hour sales. The percentage jumped slightly to 5.1 percent in 1999 and then to 13.9 percent in 2000. In 2001, wholesale transactions reached 39.1 percent of the company's megawatt hour sales.

Enron said this shows a dubious trend.

Higgins said it was the byproduct of the company's effort to secure competitive prices. He said the cost of power at the Mead substation soared during the Western energy crisis because Nevada Power was the only utility buying out of that location. In an effort to find a more competitive environment, the utility would buy power at other trading sites and then execute swaps with other companies.