The Northern Nevada utility will be allowed to boost rates to compensate for $3.1 million legal expenses, but it cannot recover any of the $19.5 million settlement payment it made to Enron. If the legal expenses are recovered through a rate adjustment for one year, the utilities commission expects the typical residential bill in Reno would go up 22 cents, said commission spokesman Sean Sever.
"This opinion closes the book on a time that was extremely difficult," said Jo Ann Kelly, chairwoman of the Public Utilities Commission. She referred to the energy crisis of 2000 and 2001 when wholesale power prices in the West soared, leading to the biggest electric rate case in Nevada history.
Michael Yackira, CEO of utility holding company Sierra Pacific Resources, said the company has not decided whether to ask for reconsideration or appeal the decision. "It's a disappointment for us, but it's great to have the Western energy crisis behind us once and for all," Yackira said.
State consumer advocate Eric Witkoski said the commission made the right decision. "I think the commission did a good job," Witkoski said.
The Northern Nevada utility, like Nevada Power Co. of Las Vegas, contracted with Enron Corp. for power supplies during the western energy crisis of 2000 and 2001. The utilities commission in 2002 disallowed almost half of a $922 million energy rate increase for Nevada Power Co., finding that the utility made imprudent power purchases during the energy crisis.
As a result, bond rating agencies downgraded bonds of Nevada Power and affiliate Sierra Pacific Power to junk bond level.
Enron, which already was in bankruptcy, terminated power supply contracts with the utilities, saying the utilities failed to provide sufficient financial assurances after the bond rating cuts. Then, Enron sued the two companies for the difference between the prices quoted and the lower cost of power in the market.