Utility executives say best to stop power plant sales

JOHN WILKERSON

Thursday, March 8, 2001 | 8:26 a.m.

CARSON CITY, Nev. - The state's major electric utilities told Nevada legislators Wednesday that planned sales of their power plants, in the works for two years, don't look like such a good deal now.

As recently as Feb. 21, the utilities said they were committed to selling the power plants. But Steve Oldham, a senior vice president of Sierra Pacific Power Co., told the Senate Commerce and Labor Committee that the power crisis in neighboring California changed matters.

"Continued ownership of the power plants is in the best interest of consumers at this time, from what we know," Oldham said. "An action not in the interest of our customers is not in the interest of our shareholders."

Oldham commented during a hearing on SB253, which would stop Reno-based Sierra Pacific and Las Vegas-based Nevada Power, both part of Sierra Pacific Resources, from selling their power-generation plants for at least two years.

Nevada's Public Utilities Commission and the Federal Energy Regulatory Commission had directed Sierra Pacific and Nevada Power to sell the plants as a condition of the companies' 1999 merger.

The two utilities buy about half of their power and generate the rest. If the pending sales went through, their power generation capacity would drop to almost nothing.

Sierra Pacific representatives said cancellation of the plant sales would make it more difficult to go through with Sierra's $3.1 billion plan to buy Portland General Electric in Oregon.

Revenues from the plant sales would have reduced corporate debt. While the utilities' fiscal health has improved with a recent, record-high $311 million rate increase, it might not have improved enough to meet federal debt-equity ratios that would govern the Portland deal.

Tim Hay, the state's consumer advocate for utility customers, said the state should require the utilities to keep the plants until 2006. He said even by conservative estimates that would save rate payers up to $1.7 billion over five years

Commerce and Labor Chairman Randolph Townsend, R-Reno, said he was relieved to hear the utilities agree with the moratorium.

"It's always nice when everyone agrees on the general concept," he added.

Doug Ponn, a vice president of Nevada Power and Sierra Pacific Power, said political wrangling over the power plants already has cost the company about $16 million. He estimated that undoing the contracts now will cost the company $4 million more.

The two utility executives emphasized that if legislators decide to stop the power plant sales, they should ensure that Sierra Pacific Resources can hang onto its 14 percent ownership of the Mohave Generating Station.

The sale of the Mohave plant to Arlington, Va.,-based AES Corp., which was approved by the PUC past summer, is further along than the other plant deals.

Michael Pitlock, representing AES, said the Legislature shouldn't block the sale. He said the acquisition by AES would be beneficial to Nevada customers because the company would have to sell the power in Nevada at 1998 rates for two years.

Sen. Mark Amodei, R-Carson City, said he was concerned that the buyers of the Mohave plant could sue Nevada if legislators prevent the sale.

But Kevin Powers, the committee's legal counsel, said he thinks the state is safe because the deal is not yet final.