A previous bankruptcy court ruling in an ongoing dispute between Enron and Nevada Power Co. and Sierra Pacific Power Co. over termination payments stemming from 2001 power contracts is not the final word in the squabble, a FERC administrative law judge (ALJ) ruled on Thursday, allowing related proceedings at the federal agency to continue.

Earlier this summer, Enron Power Marketing Inc. (EPMI) told FERC ALJ Karen Johnson that a bankruptcy court’s ruling siding with Enron in the contract spat means that FERC is barred from granting a complaint filed by the Nevada utilities.

FERC in a July 22 order set for expedited hearing a complaint filed by Nevada Power and Sierra Pacific Power against EPMI [EL04-1-000]. The complaint involves contracts entered into pursuant to the Western Systems Power Pool (WSPP) agreement in 2001 and terminated by Enron in May 2002. The Nevada companies believe that Enron did not have the right to terminate the contracts and therefore is not entitled to termination payments of over $300 million.

But in an Aug. 13 filing with Johnson, EPMI asked for a summary disposition on whether FERC can revisit the issue of whether EPMI lawfully exercised its contract rights in accordance with the terms of a section of the WSPP agreement.

This is an issue that “has already been decided and reduced to a final judgment by the Bankruptcy Court of the United States District Court for the Southern District of New York, which is now on appeal to the United States District Court for the Southern District of New York,” EPMI said in its filing.

EPMI said that the bankruptcy court “left no issue for the Commission to decide with respect to the enforcement of the termination payments. Relitigation of the issue in this forum is therefore barred by the doctrine of res judicata and the United States Constitution’s separation of powers principles.”

Not so, said Johnson, in responding to the filing on Thursday. She said that “there is good reason to believe” that review of the WSPP agreement by the Commission is proper.

Johnson cited previous language that the Commission used in setting the case for hearing. The federal agency said that the terms of the WSPP agreement constitute the rates, terms and conditions of service by a public utility. “Therefore, the terms and conditions of the WSPP agreement are clearly subject to the Commission’s jurisdiction and review under sections 205 and 206 of the FPA,” FERC said in its order.

“Properly viewed, the Commission’s reasoning does not contradict the decision of the bankruptcy court or overreach the Commission’s authority,” wrote Johnson, noting that the bankruptcy court’s decision was based on a Commission order dealing with the original negotiations.

“This case was set for hearing based on a separate Section 206 complaint that alleges, among other things, fraud allegations that were not fully considered by the bankruptcy court since no discovery was done on these issues and the issues were decided by summary judgment,” the ALJ said. “The Commission explicitly notes the need for information as a reason to set this matter for evidentiary hearing.”

She said that EPMI’s challenge also relies on a narrow reading of the Commission’s July 22 order. “While the Commission set a ‘primary’ issue for hearing, the Commission has cautioned against reading such language as limiting the scope of the hearing to those issues only,” the ALJ said.

Therefore, while EPMI has noted similarities between the issues raised in the complaint and specifically noted by the Commission in the July 22 order and the issues raised at the bankruptcy court, Johnson said that the Commission’s order does not limit this hearing to only those specific issues. “Since this hearing is not limited to the precise issues raised in the bankruptcy court proceeding, there are several ‘genuine issue[s] of fact material to the decision’ that were not clearly resolved by the bankruptcy court,” wrote Johnson.

The ALJ therefore said that FERC has primary jurisdiction and that res judicata does not apply. “Other arguments raised in EPMI’s motion and not explicitly discussed have been considered and discarded. Accordingly, EPMI’s motion is denied.”

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