Editorial: Buyout of utility is enticing

Friday, July 19, 2002 | 3:49 a.m.

WEEKEND EDITION: July 21, 2002

Nevada Power's customers have been hit hard during the past few years because of skyrocketing increases in their electric bills. At the same time, Nevada Power's stock and credit ratings have been hurt because of its bad business decisions and adverse rulings on rate cases by state regulators. There even is speculation that Southern Nevada's electric company may have to declare bankruptcy.

It was intriguing then, and frankly encouraging, to hear last week that the Southern Nevada Water Authority, the government body that oversees our water supply, wants to buy Nevada Power. It makes sense to consider having the government run our electricity service since it's a necessity just like water. And, unlike a company with private investors, a government-run utility can look at the long-term picture and how it will affect its customers without having to please impatient shareholders. Government-run electric companies also have had a good record of providing lower costs of electricity than private companies.

A takeover by the Southern Nevada Water Authority of Nevada Power should be aggressively pursued. But there still are questions that need to be fully answered, among them whether the water authority will be able to deftly shift gears and handle the complex job of providing electricity, and whether the elected officials who would oversee the new utility would have enough backbone to raise rates when it may be necessary, but politically unpopular, to do so.

The biggest unknown is just how much a takeover would cost taxpayers. Southern Nevada Water Authority officials haven't disclosed what they are prepared to bid. It is certain, however, that any takeover would carry a huge price tag since Nevada Power, which says its book value is slightly more than $1 billion, reports that it isn't for sale. The Southern Nevada Water Authority says a buyout would be minimized through the purchase of 30-year bonds that would be repaid through the customers' monthly bills. And while a buyout is enticing, a deal shouldn't be pursued at all costs -- the water authority will have to be strong enough to walk away from the negotiating table if the price is too high.