FERC under pressure to look again at Enron deals

Kevin Rademacher

Thursday, June 17, 2004 | 10:57 a.m.

Under increasing pressure from Congress and the national media, the Federal Energy Regulatory Commission may be closer to revisiting the dealings notorious power trade Enron Corp.

It's a development that could help save Nevada Power Co. and its sister company Sierra Pacific Power Co. of Reno more than $300 million.

Wednesday evening CBS News ran a national story that included volatile excerpts of recorded conversations between a power trader for the Colorado River Commission and officials from Enron and other power marketers. Nevada Power officials claim that the obscenity-laced conversations prove Enron and the CRC conspired to manipulate the power markets and damage the utility.

This morning, FERC Chairman Pat Wood indicated that the commission would review those tapes and others made public by Western utilities claiming they were harmed by market manipulation, a Bloomberg News story said. There was no indication, however, of a timetable for the review or whether it would be associated with demands that FERC throw out contracts Enron and other power marketers signed with utilities during the Western energy crisis.

Still, officials for Nevada Power said the developments indicated movement on FERC's part.

"That would be a positive development," said Russ Campbell, an attorney representing Nevada Power Co. in its appeals to FERC.

In June 2003, FERC, despite a report from its own staff that Enron and other companies manipulated the power markets to inflate contract prices, ruled that utilities were still bound by long-term deals signed during the Western energy crisis of 2000-2001.

In August, a U.S. Bankruptcy Court judge in New York, who is handling the Enron insolvency, ruled that based on the FERC ruling Nevada Power and Sierra Pacific Power owe Enron $336 million in termination payments. Enron cancelled the contracts in May 2001 when the utilities had their credit ratings lowered to junk levels.

Since the June 2003 FERC ruling and a November affirmation, Nevada Power officials have sought a rehearing based on claims that Enron acted improperly in terminating the contracts. It also has made a subsequent filing based on the trader tapes that seeks a rehearing.

Executives from the Nevada utilities have indicated that should the $336 million judgement be upheld it could result in bankruptcy for its parent company -- Sierra Pacific Resources -- or one of the utility subsidiaries.

Enron officials have, while admitting that some of its employees engaged in questionable acts, repeatedly denied any institutional wrongdoing. They said that the pursuit of the termination payments is merely the carrying out of a fiduciary responsibility to the creditors in the bankruptcy proceedings.

Campbell disagreed.

"They are trying to finance a buyout of their creditors with our money and on the backs of the customers of Nevada," he said.

He also disputed the characterization of those trader tapes as merely "trash talk" that never materialized into real damage to the market or participating utilities.

"Enron officials have pleaded guilty to felony crimes," Campbell said. "You don't plead guilty based on hollow words."

Last month, the Nevada companies also made oral arguments in a New York appeals court case seeking to overturn the bankruptcy court ruling as well.

If the tapes do not move FERC to set aside the contracts, Campbell indicated that the tapes could move one of the appeals courts.