Nevada Power merger hearings off to rocky start

Tuesday, Nov. 10, 1998 | 11:35 a.m.

The merger between Nevada Power Co. and Sierra Pacific Resources Inc. isn't going smoothly on the regulatory side.

On the first day of the Public Utilities Commission's three weeks of hearings on the proposed $4 billion merger of the state's two largest electric service providers, regulators asked about plans to sell power plants. But executives for both companies were short on specifics and sometimes provided answers PUC representatives didn't want to hear.

Still, Michael Niggli, president and chief operating officer of Nevada Power, was upbeat after he and Malyn Malquist, president and chief executive officer of Sierra Pacific, testified on structural issues. Tough questions on how power plants would be sold and what would be done with the proceeds of the sales created tension in the packed hearing room, filled mostly with attorneys representing companies intervening in the process.

Niggli noted that no one has gone through a utility merger and a restructuring of the electrical industry at the same time, so it wasn't surprising the companies are under such close scrutiny.

"Restructuring is new, divestiture (of power plant assets) is new," Niggli said. "This was just the first day of three weeks of testimony. I think by the end of the hearing we will show that we are pro-competition and pro-customer. We just don't feel we need to lay out every step of the process."

In his testimony, Malquist referred to it as "a chicken-and-egg conundrum." The regulators want to hear the specifics of the divestiture, but the companies don't want to disclose some of the details, partially for competitive reasons, partially because they haven't gotten that far in their planning.

The PUC is charged with guaranteeing the merger is in the best interests of Nevada residents. PUC officials fear that when Nevada Power and Sierra Pacific sell their plants, the buyers will raise rates to compensate for the premium prices they'll pay.

Jon Wellinghoff, staff counsel for the PUC, said the companies are watching out for the interests of their shareholders and not necessarily for all Nevadans.

The companies have indicated they plan to sell their plants in at least three packages for the northern part of the state and four for the southern part. The utilities estimate they'll get a total of more than $1 billion in those sales. The regulators want specifics on what will be done with the proceeds, but the utility companies haven't determined what they'll do.

Steven Oldham, vice president of transmission services for Sierra Pacific, said company officials have discussed investing the money in the transmission and distribution system, retiring existing debt, investing in other generation stations and even expanding into other neighboring states.

Today, the PUC was to hear testimony on the proposed merger's effect on competition and existing contracts with vendors and suppliers.

The scene shifts to Carson City next week during the Comdex computer exhibition when hotel rooms will be in short supply. The third phase will begin Nov. 24, back in Las Vegas.