Avista being sued over Enron deals

SPOKANE — A lawsuit contending Avista shareholders were hurt by deals involving Avista and Enron was filed yesterday in federal court.

The lawsuit contends that Avista's stock price dropped from more than $67 per share to around $11 per share because of its dealings with Enron.

Avista's relationship with Enron is already the subject of an investigation by the Federal Energy Regulatory Commission (FERC).

"We'll, of course, do our best to fight this," said Hugh Imhof, an Avista spokesman. He declined further comments because of the pending litigation.

The lawsuit covers all purchases of common stock between Nov. 23, 1999, and Aug. 13, 2002.

The complaint contends Avista and some of its officers and directors issued false and misleading statements concerning the company's business and financial condition.

Specifically, it alleges Avista officials failed to disclose that the utility was engaged in risky energy-trading activities with Enron and its affiliate, Portland General Electric (PGE), involving so-called "ricochet" or "megawatt laundering" trades.

Enron, a Houston-based energy trading company, collapsed in scandal and filed for bankruptcy protection last year.

Avista acted as a middleman between Enron and PGE so Enron could evade California's caps on electric-power prices and charge California artificially high prices for electricity during the period involved, the lawsuit says.

The lawsuit seeks unspecified damages.

FERC is looking into allegations that Avista energy traders served as middlemen in Enron schemes to manipulate electricity and natural-gas markets in the West in 2000 and 2001.

Avista officials contend they were unwittingly used by Enron in "sleeve" trades with PGE that netted $2,500.

Enron owns PGE, and FERC rules prohibit affiliated companies from trading directly with each other. Avista helped the companies work around the rule by buying electricity from Enron and simultaneously reselling it to PGE for a fee, FERC staff contends.

The FERC report contends Avista routinely acted as a middleman to help Enron carry out trading strategies designed to profit from California's chaotic deregulated energy market.

Avista Utilities serves about 320,000 electricity customers in Idaho and Eastern Washington and supplies natural gas to 285,000 customers in California, Idaho, Oregon and Washington.