Nevada’s largest utility says it’s losing big money

Tuesday, Feb. 6, 2001 | 11:53 a.m.

CARSON CITY -- Sierra Pacific Resources Corp., the major utility company in Nevada, says it is "bleeding" financially because of the rising cost of fuel, and it expects to lose money.

Walt Higgins, chairman of the board of Sierra Pacific, testified today before the Senate Commerce and Labor Committee, which kicked off three days of hearings into the growing electricity problems confronting Nevada and the West.

The utility, parent of Nevada Power Co. of Las Vegas, last week asked the state Public Utilities Commission for an average 17 percent power increase in Southern and Northern Nevada.

"The rate increase was very painful," Higgins said. "But there is no escaping the consequences."

Without the additional money, Sierra Pacific Resources would not be able to pay for the fuel to supply its customers and would not have cash to expand its transmission lines to handle the growing economy in Nevada.

"A failure to act will cripple Nevada," he said.

The proposed increase is on top the monthly rate hikes that have been imposed since last summer by Nevada Power Co. If the current application is approved, the average Clark County customer using 1,100 kilowatt hours a month would pay $97.90 -- almost $20 a month more than last summer.

Higgins said the company is collecting only about half of the money it needs to pay for its higher fuel bills. For instance, he said, in the summer of 1998, Nevada Power was paying $42 per megawatt hour for peak times. The utility expects to pay $400 per megawatt hour this summer.

The increase in Northern Nevada fuel costs has been 300 percent, he said.

Donald Soderberg, chairman of the state Public Utilities Commission, defended the so-called "global settlement" of last summer that allowed Nevada Power and Sierra Pacific to raise rates once a month to partially offset the higher costs of their fuel.

Soderberg told the committee that "If we did not adopt the global settlement, there would have been rolling blackouts in Nevada before California." He said the utilities would not have been able to pay their bills.

The 1999 Legislature had imposed a freeze on rate increases as part of its deregulation bill.

Higgins said he expected new generating plants to be built in Nevada to increase the supply. "There should be enough power to satisfy the need in Southern Nevada" in the future if the additional facilities are added, he said.

If the rates are approved, they will still be lower than California, he said. And other states are experiencing the same problems. For instance, he said, Idaho Power is looking at a 24 percent increase. And Seattle has already imposed a 10 percent increase and is asking for an 18 percent hike.

When Nevada Power Co. merged with Sierra Pacific Power Co. of Reno, the agreement called for the sale of its generating plants. That was approved by both state and federal authorities.

Higgins said Sierra Pacific Resources has entered into contracts to sell seven of its nine plants for $1.7 billion. If those contracts are negated, he said, there probably will be lawsuits filed against the state and other companies.

Under the sale, Sierra has the right to buy back power at 1998 prices. Those buy-back contracts, Higgins said, has saved Nevada customers $875 million.