Nevada Power parent will fight public takeover plans

Tuesday, July 23, 2002 | 11:19 a.m.

RENO -- Sierra Pacific Resources Inc. is launching a campaign to try to dissuade Clark County voters this November from favoring a public takeover of its Nevada Power Co. subsidiary.

Walt Higgins, chairman, president and CEO of Sierra Pacific, said he doesn't "like the tactics" of those who are putting the question to the voters.

"We don't have a single fact," Higgins said after the annual shareholders' meeting Monday. "We have a lot of rhetoric and a lot of promises that are based on nothing. If we can't even talk about what the price is and what the cost of power will be, rhetoric means nothing.

"People need a lot more facts before they do something like this. We don't know anything about this and neither do the people proposing it."

Higgins said the proponents are talking about a not-for-profit system -- which implies it's a charity, he said. They talk about local control, Higgins said, when the company is already owned and operated in Nevada.

"We will be actively involved in making certain the voters in Clark County fully understand this measure and that, in our view, the measure may not be in the customers' best long-term interest," he said in his prepared speech to the shareholders.

The Southern Nevada Water Authority board has retained financial and investment advisors to put together an offer to buy the utility, and Clark County voters in November will consider an advisory measure on whether a government-run utility should take over the power system.

The shareholders' meeting was peaceful and the three directors -- Krestine Corbin, Clyde Turner and Dennis Wheeler -- were re-elected to terms expiring in 2005.

Higgins was asked by one shareholder how close the company has been to bankruptcy. He said the company engaged legal help to "protect the company," and that its cash reserve fell to its lowest level a few weeks ago.

"I'm not declaring victory over our liquidity problem," he said, adding that the financial picture is improving.

Dividends to the shareholders have been suspended, saving $80 million for the year. Higgins said restoration of the dividend is unlikely in the near future.

One shareholder asked whether the company officers should take a pay cut because the dividends have been cancelled. Higgins said officers have not received incentive pay for two years and the salaries of many officers in the company have been frozen.

There have been feelers about the purchase of the utility when its stock plummeted, Higgins said. But he added, "The company is not for sale." He declined to name those who might have been interested in buying the company.

One shareholder suggested the company has gone downhill since the merger between Nevada Power and Sierra Pacific Power Co. of Reno. But Higgins defended the merger.

The problems of the company can be attributed partially to the lack of low cost hydropower from the Northwest and the upheaval in the California energy market, Higgins said. The utility, he said, has had to "absorb nearly half a billion dollars in energy costs that were not allowed" by the Nevada Public Utilities Commission.

Higgins said Nevada Power is in court to recover costs that were not approved by the state. And he said the utility is petitioning the Federal Energy Regulatory Commission to rule that prices set last year for power in the West were too high and that refunds are due.

"Raising power rates is not pleasant," Higgins told shareholders.

Even with the rate increases, Higgins said rates of Nevada Power are as low as utilities in most Western states and lower than California. And Sierra Pacific in Reno is on average with rates around the West.

Power rates have decreased recently, he said. And that should help offset some of the high-priced contracts the utility has. But the lower rates now will not allow Sierra Pacific to go back and recover what was disallowed, he said.

Sierra Pacific faces a $300 million damage claim from Enron in a dispute over a broken contract. Enron cancelled the contract to sell power when it said Sierra Pacific's credit rating was deficient.

Higgins said the utility "intends to fight this and never pay a cent." Enron is now in bankruptcy court.

While the company has faced numerous financial problems, Higgins hailed its agreement with Duke Energy North America to supply up to 1,000 megawatts of electricity, as well as natural gas supplies to meet the peak summer period through Sept. 15.

"This offsets the loss of supply from canceled contracts," he said. "In addition, Duke agreed to supply more power if necessary to meet further needs through the end of the year."

He said Duke has agreed to accept a deferred payment for a portion of the summer costs. And he said he hopes the Duke agreement "will influence the decisions of other suppliers with whom we are negotiating similar arrangements."