Nevada Power parent reassures analysts about its stability

Friday, June 8, 2001 | 10:56 a.m.

Legislation approved by Nevada lawmakers will stabilize the finances of Sierra Pacific Resources Inc., company executives told the investment community Thursday.

In a conference call with analysts, Nevada Power Co. President Mark Ruelle and Sierra Pacific Treasurer Richard Atkinson explained how the signing into law of three bills will put the state's dominant electric utility on firmer ground. Nevada Power is the largest of Sierra Pacific's subsidiaries.

The most important of the new laws, in essence, returns Nevada Power to its status as a fully regulated utility and re-establishes deferred energy accounting that will enable the company to file cases before the Public Utilities Commission to adjust rates based on the cost of fuel or purchased power.

For consumers, that means the end of the recent spate of monthly rate increases from Nevada Power; for the investment community, it's an assurance that the utility will be able recover fuel and purchased power costs and have a reasonable rate of return on investments.

Officials with the Reno-based company conducted the call to explain the affect the legislation would have on second-quarter earnings, which will be released sometime in mid-August. Executives did not provide earnings estimates.

Sierra Pacific stock traded this morning at $15.89, off 6 cents from Thursday.

Following the call, Atkinson explained that the quarter will be the company's first as a regulated utility since Nevada Power and Sierra Pacific Resources merged in 1999.

He added that earnings usually are most volatile in the company's second and third quarters when energy usage tracks closely with weather.

The company had net losses of $83.5 million, $1.06 per share, in the first quarter of 2001, attributing most of them to unrecovered costs and uncollected accounts in wholesale fuel and power markets. The company's losses also were compounded by added expenses of its failed bid to acquire Portland General Electric in Oregon.

Ruelle said in the call that Nevada Power would file for a general rate increase by Oct. 1 and a deferred energy case by Dec. 1. Because the PUC has six months and four months, respectively, to act on those cases, ratepayers can expect a new rate increase around April 1. Sierra Pacific Power, the company's Northern Nevada utility, will make similar filings on a schedule that will run about two months after the Nevada Power requests.

One of the features of the new deferred energy accounting legislation is that those rate increases can be amortized over up to three years, meaning that large fuel and energy increases can be spread out.

Other legislation affecting the Nevada utilities are a law enabling large electricity users to contract with wholesale power companies and another that mandates that 15 percent of the company's portfolio be generated by renewable energy sources by 2013.

Ruelle said the company supported the bill allowing big companies to negotiate for their own power because a clause prohibits deals that would have an adverse impact on other power users. The renewable energy legislation would have minimal impact on the company, Ruelle said, because it already has a large percentage of its energy portfolio invested in geothermal sources.