Justices remove Nevada from lawsuit in Enron case

CARSON CITY - The Nevada Supreme Court threw out a state lawsuit Thursday against three utility companies that alleged they conspired with Enron to drive up natural gas and electrical prices.

Justices said the lawsuit was a federal matter, not a state one.

In a 6-0 decision written by Chief Justice Michael Cherry, the court found the claims against Reliant Energy, Reliant Resources and Centerpoint Energy were pre-empted by federal law and regulations.

The claims against the companies were filed by the state attorney general's office and three individuals.

The attorney general's office asserted that the companies conspired with the now-defunct Enron company in 2000-01 by engaging in "rapid bursts" of purchasing natural gas followed by "rapid bursts' of selling the same gas. Through this market manipulation, they secured considerable profits and "significantly higher prices" for consumers, the office alleged. This practice is called "churning."

The attorney general's office alleged that Enron and Reliant orally agreed to an arrangement where they both could secure profits.

The court noted that the Federal Energy Regulatory Commission determined that Reliant sales were under its jurisdiction, not the state's. Churning at the time also was not subject to FERC regulations. Later federal regulations were revised to prohibit anti-competitive behavior and market manipulation.

In the decision, Cherry wrote "from a practical standpoint, if each state intervened on this field with different regulations, the result would be a maelstrom of competing regulations that would hinder FERC's oversight of the natural gas market."

But while agreeing that a lower court was correct in dismissing the lawsuit, Cherry admonished Congress for not doing enough to protect citizens against such market manipulation.

"While this conclusion fails to provide redress for our citizens, the long and entangled history of natural gas regulation in this country requires this result. Because Congress has afforded no room for the imposition of state-law requirements, federal pre-emption bars this action."

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.