Editorial: Ruling was anything but insane

Thursday, April 4, 2002 | 9:03 a.m.

Earlier this week Wall Street analysts reached their verdicts on last week's decision by the Public Utilities Commission to grant Nevada Power just $485 million out of the $922 million the utility had requested. Moody's Investor Service -- which downgraded the credit rating of Sierra Pacific, the parent company of Nevada Power -- called the PUC's decision "unexpectedly harsh." Goldman Sachs analyst Jonathan Raleigh, who lowered the company's stock rating, said the regulatory ruling was "surprisingly severe." Ronald Tanner, an analyst with Legg Mason Wood Walker, was even harsher. "Your regulatory commission is insane," Tanner told Sun reporter Steve Kanigher.

Despite the criticism, Nevada's regulators did the right thing. In some respects, the utility could have had it worse: Public Utilities Commissioner Richard McIntire wanted the entire request rejected. One of the biggest strikes against the utility was its 1999 decision to forgo a long-term energy deal that would have covered 25 percent of the company's needs and produced substancial savings. Nevada Power could have paid $33.75 per megawatt hour for power from 2000 to 2003 -- an amount significantly less than the average of $172 per megawatt hour the utility paid in 2001. Nevada Power executives didn't use sound judgment then, a mistake that its shareholders, not its customers, should absorb.

Before the PUC's ruling, Nevada Power officials said the utility ultimately could be forced to file for bankruptcy if it didn't receive all the $922 million it had sought. And Sierra Pacific stock has tumbled sharply this week, losing nearly half its value since the PUC decision. While there are concerns about the company's long-term viability, that speaks to the mismanagement by Nevada Power executives that got them to this point, not anything that state regulators did.