Nevada Power Co. has asked the state Supreme Court to order the Public Utilities Commission to review some details of a $922 million rate case decided in 2002.
In that case, regulators disallowed the recovery of $437 million spent buying power during the Western energy crisis based on imprudent business practices on the part of the utility.
Of that disallowance, $180 million was attributed to a contract with Merrill Lynch's energy group that Nevada Power failed to execute. The company later ended up buying power at a higher rate, constituting imprudence regulators said at the time.
In its new motion, the Las Vegas utility said the $180 million disallowance should be thrown out since Dan Gordon, the former head of the Merrill Lynch group, has pleaded guilty to federal fraud charges.
All along Nevada Power executives have maintained that the contract was abandoned because the Merrill Lynch did not have the resources available to fulfill the deal.
Nevada Power's motion also points to a series of "sham transactions between Enron and Merrill Lynch" that were discovered during investigations by the Federal Bureau of Investigation and the Securities and Exchange Commission.
"To not consider this evidence would mean the disallowance based on the fraud od Merrill Lynch and others will result in a grossly inequitable penalty as to Nevada Power, an innocent victim," the utility's motion said.
Even before Gordon's recent guilty plea, regulators had become skeptical. In deliberating a subsequent rate case that again brought up the Merrill Lynch contract, regulators backed away from another proposed disallowance.
"This year we know more," PUC Chairman Don Soderberg said, citing news reports of Gordon's dubious activities. Gordon ultimately admitted to bilking Merrill Lynch out of $43 million through a scheme of fake energy trades and off-shore shell companies.
The case was appealed in the weeks following the PUC's initial ruling. In April 2003, a District Court judge upheld the case. It was subsequently appealed to the state Supreme Court where it is now pending.
Nevada Consumer Advocate Tim Hay said he will file a reply to the motion with the Supreme Court by March 22. Hay said the utility is attempting to recharacterize the commission's actions.
"The Merrill Lynch adjustment stood as a proxy for what a prudent utility would have done to cover its position," he said, indicating that the company should have sought similar contracts with other suppliers.
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