Nevada Power Could Seek

Nevada Power Could Seek $43 Million from Colorado River Commission

By John G. Edwards, Las Vegas Review-Journal -- Mar. 17

An attorney for Nevada Power Co. suggested Wednesday that the utility could seek at least $43 million in damages from the Colorado River Commission for alleged improper trading practices during the energy crisis two years ago.

"We know it's a lot of money," said Russ Campbell, an attorney from Birmingham, Ala.

But he declined to say how much Nevada Power Co. would actually seek. Campbell said the Southern Nevada Water Authority has publicly said it saved $12 million by purchasing power from the river commission in 2000 and projects that it might have saved $20 million the following year.

He also noted that Nevada Power paid $11 million for so-called energy imbalances during 2000 and 2001 to the river commission. Campbell said that money should also be repaid to the utility.

George Caan, the river commission's executive director, said Nevada Power owed the state agency money, rather than the other way around. A study done for his agency shows Nevada Power owes $4 million, he said.

Caan said he would like to see calculations made by ABB, a European consulting firm, for Nevada Power on the same issue. But he said Nevada Power refused to release the study. Campbell said the report was in "draft" form but would be released later, probably during legal or regulatory proceedings.

The issues stem from Nevada Power's participation in a Federal Energy Regulatory Commission case into energy-market manipulation by Enron Corp. with so-called partners, purportedly including the river commission.

Nevada Power has also started an arbitration proceeding with the river commission over the imbalance tariff, or schedule of rates. While Nevada Power could recover funds from the arbitration, Campbell acknowledged that Nevada Power doesn't know whether it will be able to recover any profits from the river commission to FERC. It's not clear what the federal government will do with those funds, he said.

Campbell argued that the river commission unfairly used Nevada Power's imbalance rate schedule to profit during the energy crisis at the expense of Nevada Power.

The river commission could create an imbalance when it imports too little or too much power to satisfy the needs of its customers, the water authority and some industrial customers outside of Henderson.

When the river commission or another party imports too little, a negative imbalance results, and Nevada Power must make up the difference under its imbalance tariff.

Campbell claimed that the river commission also bought excess power to sell in California at high prices and left Nevada Power with responsibility for the excess if it couldn't sell the power in California at a profit.

"When their games didn't play out, they dumped on us (the excess power) or leaned on us (for the power shortage)," he said.

Caan said the positive imbalances don't cause a problem for Nevada Power, but negative imbalances do. Nevada Power's tariff for imbalance services gives it the option of refusing to take excess power from the river commission if it cannot sell it for a profit. Alternatively, Nevada Power could buy the extra power at 90 percent of the utility's cost.

"The utility has the option of either taking the energy themselves or forcing the CRC to get rid of it," Caan said. "That's their tariff that they could have changed at any time. If we don't get rid of (excess power they don't want), they get it for free.

"You might ask, 'Why didn't they do that?' It's because they were making money" from the excess power, Caan said.

The river commission official referred to calculations from California experts that indicate Nevada Power Co. and Sierra Pacific Power Co., its affiliate, made $15 million in profits trading power in California during the summer of 2000.

Campbell said the river commission also traded in California and used its power-trading profits for the benefit of the water authority.

"They were gaming in California. They were not just on a mission to make money. They were on a mission to hurt us and in the process to hurt our consumers, our shareholders," Campbell said. "In order to accomplish this, they had to submit false schedules to us."

Campbell said trader tapes indicate coordination between the two government agencies. The water authority "knew what (the river commission) was doing and knowingly accepted the benefits of that," Campbell said.

Vince Alberta, a spokesman for the water authority, said that the river commission is its primary power provider but that it also buys electricity from Nevada Power.

"We work both with the Colorado River Commission and Nevada Power to provide enough power for our operational needs," he said. "Any benefits from these interactions are directly passed on to customers."

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