Judge releases opinion affirming Nevada Power ruling

By Liz Benston

Thursday, Dec. 30, 2004 | 10:53 a.m.

A federal judge has issued an opinion reiterating an earlier bankruptcy court decision saying Nevada's two major electric utilities could have to pay a judgment in favor of Enron Corp.

But Nevada Power Co. and its sister company, Sierra Pacific Power Co. of Reno, say the opinion contains a significant development that, if the utilities lose to Enron, could make it more difficult for the Houston energy trader to collect a higher rate of interest on the judgment.

In an opinion dated Dec. 23, U.S. District Judge Barbara Jones in New York said pre-judgment interest on the $336 million should have been calculated using a lower "present value rate" rather than the rate of 1 percent per month used by the bankruptcy court. The difference could save the Nevada companies about $40 million in interest.

The opinion, disclosed in a filing with the Securities and Exchange Commission on Wednesday, also doesn't change the status of a trial that is set for March 8, said David Kuney, an attorney for the Nevada utilities.

The Nevada utilities are fighting a judgment that they owe $336 million in termination payments to Enron Power Marketing Inc. Enron canceled contracts with the Nevada utilities in 2002 after parent company Sierra Pacific Resources saw its credit decimated as a result of Nevada regulators rejecting a request by Nevada Power to increase customer power rates. The Nevada companies had argued that Enron, already in bankruptcy, would not have been able to fulfill the contracts.

New York Bankruptcy Court Judge Arthur Gonzalez ordered the Nevada utilities to make a $336 million payment to Enron in 2003. An appeals court judge in October vacated a summary judgment in favor of Enron and ordered a trial, saying Gonzalez needed to resolve certain key issues in the case.

One of those issues is whether Enron used discretion when it terminated the power contracts with the Nevada utilities.

Repeating Gonzalez's decision, Jones wrote that the Nevada utilities could be liable for the $336 million because they failed to terminate the contract with Enron upon discovering fraud at the Houston energy trader in 2001. The Nevada companies accepted power from Enron from January through April 2002. Enron filed for bankruptcy in December 2001.