Regulator: Power players must back up their numbers

Friday, March 9, 2001 | 12:11 p.m.

The chairman of the Public Utilities Commission of Nevada warned participants in upcoming utility issue debates that they had better come armed with statistics to back up their arguments.

"We've had so much fuzzy math on this docket alone that it kind of seems like a Hollywood divorce case, and I'm not pleased," said Don Soderberg at Thursday's PUC meeting.

Commissioners had just completed debating a petition from Consumer Advocate Tim Hay requesting an order for a state moratorium on the divestiture of power plants owned by the state's dominant utility company, Sierra Pacific Resources Inc.

Sierra Pacific is the parent company of Nevada Power Co., which provides most of the electricity in Las Vegas.

The PUC unanimously approved a plan to set hearings on the issue and Soderberg said they would be conducted in conjunction with hearings on Nevada Power's request to sell its Harry Allen Power Station, which is located near Las Vegas, to Pinnacle West Energy, Phoenix, for $69.8 million. Nevada Power hopes to sell the 72-megawatt Apex plant, which can be fueled either by natural gas or diesel fuel, by April 27.

The Harry Allen transaction is one of four pending plant sales.

The divestiture of Sierra Pacific's power plants is a hot topic for both the PUC and the Nevada Legislature. Lawmakers are debating a bill that, in its current form, would delay the sale of the plants until July 1, 2003.

Sierra Pacific says the sales would generate millions of dollars for the company and that the proceeds of the sales would help stabilize the company's finances.

The divestiture of the plants was required by the state as a condition of the merger of Sierra Pacific and Nevada Power in 1999.

The company says it is attempting to solidify its creditworthiness, but critics say the bid to bolster finances is part of the effort to acquire Portland General Electric from Enron Corp. for $3.1 billion. In a recent interview, Sierra Pacific Chief Executive Officer Walter Higgins concurred that some of the proceeds of the sale would go toward the Portland General acquisition, but the majority would buy down debt.

In an interview after Thursday's meeting, Soderberg said the divestiture issue in particular has produced "a rash of unsubstantiated numbers" the commission is being asked to consider.

"We can't take anything at face value," Soderberg said. "Clearly, the issue of the divestiture of plants has created a whole variety of numbers and nobody has been forthcoming with backup on how they got to them. All these numbers don't seem to jibe, yet they are put out there as fact."

An example of the dizzying differences of numbers was illustrated in a report on the divestiture issue by the PUC's general counsel prior to the commission's vote.

"The (Southern Nevada Water Authority) states that recent reports by Sierra suggest that delaying divestiture two years will cost Sierra consumers, such as SNWA, $875 million to $1.1 billion in higher electricity costs during the next two years," said Dave Noble, assistant general counsel.

"The Bureau of Consumer Protection (Hay's office) has indicated that Sierra's electric consumers would save over $900 million over the next five years if divestiture was delayed," he said. "Given these numbers, SNWA conducted its own analysis and concluded that consumers could save between $1.7 billion and $3.5 billion in costs by not divesting the power plants."

Soderberg used Thursday's meeting as a soapbox to chastise the company, the consumer advocate and several interveners who have independently arrived at different numbers for how much the power plants are worth, how much the company stood to make from the sales and what impact the sales would have on customers and on the financial health of the company.

"We've got to the point where this commission is defending numbers that were just pulled out of the sky or at the Legislature or in the media and we don't see any backup," Soderberg said at the meeting.

"People used to be able to justify their numbers and I don't know what's happened in the last six or seven months, but it seems to me that we're not even using (the) back of the envelope anymore. We're pulling things out of the sky because they sound good.

"I don't know if this is an admonishment or encouragement or whatever, but I think we need to get back to showing how we came to our numbers, proving our numbers, because, quite frankly, even parties that prevailed today on a number of cases have lost credibility before this commission because they are just playing so fast and loose with these calculations," he said.

"If there's backup lying around somewhere in the back of your office, I suggest you dust if off and show it to us."

In a related matter, commissioners on Thursday didn't immediately consider Sierra Pacific's "comprehensive energy plan," which includes a detailed plan to invest up to $300 million for transmission and distribution lines, establishment of a $5 million fund to assist low-income utility customers to pay for higher power bills and to set a rate increase averaging 17 percent for the average residential ratepayer.

Commissioner Richard McIntire, who is presiding over the case, had considered splitting the different components of the plan into separate dockets, but instead decided to keep them in one package. The commission already has set a March 23 preconference hearing on the controversial rate increase component of the plan.