Nevada Power settles lawsuit with El Paso for 19 million
LAS VEGAS, NEVADA - Nevada Power Co. said it agreed to pay $19 million to settle a federal lawsuit with El Paso Corp.
The settlement was for less than the price of electricity that El Paso delivered to the Southern Nevada utility several years ago.
The local electric utility owed $19.8 million to El Paso for purchased power, plus $11 million in interest on the debt, said Michael Yackira, chief financial officer for Sierra Pacific Resources, Nevada Power's parent.
El Paso was selling wholesale power to Nevada Power in spring 2002 to Nevada Power Co. when the Public Utilities Commission disallowed all but $486 million of a $922 million Nevada Power rate increase. Nevada Power was seeking to recover expenses for fuel used in generation plants and purchased power, but the commission determined that some of the purchases were imprudent. After the decision, rating agencies downgraded the two utilities to junk bond level.
Enron, Morgan Stanley, Reliant Energy and El Paso terminated power supply contracts after the bond rating changes, saying they were not satisfied with financial assurances with the Nevada utilities. However, El Paso continued providing electricity to Nevada Power until fall 2002 and other wholesale power suppliers did not.
The utilities earlier agreed to pay up to $78 million to Enron Corp. and Morgan Stanley Capital Group to settle power supply contracts that were terminated when the utilities credit was downgraded to junk bond level in 2002.
The settlement ends "continuing and costly litigation," Walter Higgins, chairman and chief executive officer of the parent company, said in a statement.
"It also is the last oustanding legal case involving power contracts under which claims have been made against Sierra Pacific's utilities as the result of the Western energy crisis of 2000-2001," he said.
The El Paso contract was part of the 2002 rate case, and it was disallowed. So Nevada Power will not be seeking to recover the $19 million as part of a future rate case, Yackira said.
Shares in Sierra Pacific Resources gained 9 cents to close at $13.54 Tuesday on the New York Stock Exchange.
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