Thursday, Jan. 15, 2004 | 11:11 a.m.
State regulators ruled on Wednesday that Nevada Power Co. and its Reno-based sister utility, Sierra Pacific Power Co., cannot collect from ratepayers a $338 million judgment in favor of Enron Corp. -- at least not yet.
U.S. Bankruptcy Judge Arthur Gonzalez previously determined that the Nevada companies owe Enron the judgment amount for power contracts signed during the Western energy crisis and later terminated.
In November, he ordered the utilities to deposit securities as collateral to cover the judgment as well as $35 million in cash while the companies appeal the case. He also ordered the utilities to determine if they could now seek authority from the state Public Utilities Commission 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 appeals process was completed. But Gonzales in his order directed the two utilities to ask the PUC if a rate case could go forward.
PUC commissioners voted 3-0 to deny the utilities' petition, agreeing with a briefing memo from commission General Counsel Richard Hinckley that the funds can't be charged to ratepayers because a payment has not yet been made.
Hinckley pointed to a similar ruling handed down by the PUC in February 2003.
"The commission determined that the payments had to be made before applying for recovery," Hinckley said in the memo.
The commission's action, however, does not prevent the utilities from seeking recovery of the $338 million should it be forced to make the payment to Enron if the appeal process fails.
The utility emphasized that the inquiry was made at the direction of the court.
"We filed at the request of the bankruptcy court judge," Nevada Power spokeswoman Sonya Headen said. "We will follow the (PUC's) order."
The original dispute between the Nevada companies and Enron involve power contracts that were signed during the Western energy crisis and later canceled. Both the Federal Energy Regulatory Commission and the bankruptcy court have upheld the contracts in favor of Enron.
In other matters, Nevada Power has received approval from the holders of mortgage bonds to amend a dividend restriction. The move will allow Nevada Power to pay dividends to Sierra Pacific Resources.
The payments stopped in 2002 when a regulatory disallowance of $437 million and the subsequent debt it created triggered a dividend restriction established in 1953.
The move improves liquidity for the parent company, which needs flexibility to satisfy debt service and other expenses, a statement from Standard & Poor's said.
Nevada Power and Sierra Pacific Power are limited by the PUC to $70 million a year in dividends to the parent company.
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