Do not make the mistake of thinking that because my conclusion is the same as another person's that my reasoning is the same
Enron Seeks Millions for Power Never Delivered to Sierra Pacific
By KURT EICHENWALD
Published: October 6, 2003
The Enron Corporation collapsed into bankruptcy proceedings after revealing that it had reported earnings that never really existed. Now, a major Nevada utility stands on the brink of a bankruptcy filing because Enron is demanding hundreds of millions of dollars of payments for electricity that it never really delivered.
And so far, the courts say Enron is right.
The dispute between two electric utility units of Sierra Pacific Resources has been bubbling along for several months, as Sierra and Enron battled in bankruptcy court about whether the amount of money owed by Sierra was nothing -- or what is now more than $330 million. After having lost there, Sierra is expected today to file an emergency request with the Federal Energy Regulatory Commission, asking it to take charge of the controversy and invalidate the payment requirement.
…The dispute has already attracted the attention of members of Congress. On Sept. 9, Senator Harry Reid, Democrat of Nevada, and Senator John Ensign, Republican of Nevada, submitted a statement on the dispute to the Senate Committee on Energy and Natural Resources.
In it, the senators criticized the federal regulator's decision in June not to modify contested contracts with wholesale electricity suppliers that were struck during the electricity crisis -- a period F.E.R.C. has found the suppliers were engaged in market manipulation.
"Regardless of what standard is used, the only just result, the only result that doesn't reward criminal behavior, the only result that protects rather than punishes the victim is a result that frees Nevada ratepayers from the unjust and unreasonable consequences of its contracts with Enron," the senators wrote in their statement.
Take a look at the underlying case. This isn't about Enron's waskely bookkeeping (which I am personally involved in, like anyone else working in commercial litigation in Texas); it is about fake deregulation.
Sierra had to buy energy. Enron could broker the price, but Sierra couldn't pass the cost along (regulation.) Sierra had to sign a certain agreement as part of the grid (regulation.) Sierra agreed to buy the power -- a guaranteed contract. Sieraa obviously was on shakey ground, and Enron demanded that they put some money in escrow. Sierra couldn't do it. Don't prove that you can fulfill the contract, don't get the goods. End of story.
Had Enron not been gaming the market, I suspect the cost would have been something Sierra could support.