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Industry News

FERC Holds Hearing over Contested Nevada Power Contracts

LCG, April 24, 2003The Federal Energy Regulatory Commission will determine whether or not to use recent market reports in deciding the fate of long-term power contracts in Nevada.

At the end of last year, a FERC administrative law judge suggested filings by Western states be thrown out because market manipulation effects were not significant enough during the Western power crisis to warrant the rewriting of contracts. Nevada Power, along with municipal utilities from Washington and California, complained that their long-term contracts to purchase power were unfairly costly since they were made at a time when electricity prices were possibly falsely inflated.

The contracts in question were made with Enron Corp., El Paso Corp, BP Plc, Allegheny Energy, and Mirant Corp.

The legal climate changed when FERC staff released a report March 26 that detailed widespread market manipulation during the California power crisis of 2000/2001.

Now utilities want to bring the FERC report into consideration regarding the decision over whether or not to rewrite contracts.

Energy companies find the request unreasonable and believe that FERC should not protect utilities from bad decisions such as signing costly contracts. They warn that a legal outcome in favor of the utilities may have serious and devastating effects on Western energy markets, especially in terms of new investment.

Utilities find that in desperation they were forced into expensive contracts because of serious lack of capacity and high prices, and many have asserted that their customers are suffering because of what they say are high costs resulting from fraudulent behavior. Utilities also noted that FERC advised utilities to sign long-term contracts during 2001 in order to avoid astronomical short-term electricity prices.

FERC is also reviewing contracts made by Washington municipal utility district Snohomish and Southern California Water Company, and heard arguments yesterday.

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