FERC OKs Enron settlement with Nevada utilities

LAS VEGAS, NEVADA - Federal regulators approved an agreement for Nevada Power Co. and Sierra Pacific Power Co. to pay Enron Corp. $90 million to settle a dispute over terminated power supply contracts, ending a dispute that dates from 2002.

The settlement "avoids costly litigation that could very well have continued for many years," said Walter Higgins, chairman and chief executive officer of Sierra Pacific Resources.

"Most importantly, we are now totally focused on our company's foremost objectives - serving our customers well and continuing toward restoring our utilities to investment grade credit status."

Enron was seeking a $330 million judgment against the two utilities, which are subsidiaries of Sierra Pacific Resources. The utility companies decided to settle the dispute, rather than continue to fight in court and face an uncertain outcome.

The issue arose after the Public Utilities Commission disallowed all but $486 million of a $922 million Nevada Power rate case for fuel and purchased power expenses that soared during the Western energy crisis of 2000 and 2001. State regulators determined that some of Nevada Power's purchases were imprudent.

In the wake of the decision, the utility struggled to avoid bankruptcy and ratings agencies downgraded the utilities to junk bond level.

Then, several wholesale power suppliers, including Enron, terminated contracts with the Nevada utilities, saying that they were not satisfied with financial assurances from the utilities.

Enron, which was already in bankruptcy court, sued the Nevada utilities for $330 million, which was the difference between the price it could get selling power on the wholesale market and the price quoted in the contracts with the Nevada utilities.

In November, Enron and the Nevada companies announced the settlement agreement which called for $90 million, which was the maximum net amount they would pay Enron after the Nevada companies collect claims against Enron.

Bankruptcy Judge Arthur Gonzalez, who was preparing to hold a trial over the power supply dispute, earlier approved the agreement between the Nevada companies and Enron.