Columnist Jon Ralston: Utility suffers shock to system

Friday, March 29, 2002 | 5:15 a.m.

What does a utility that has been portrayed as the "Keystone Cops of utility management" and buffeted by a seemingly capricious regulatory and political environment do now?

What does a governor and Gang of 63, who green-lighted hundreds of millions of dollars in power purchases a year ago and then forgot to switch to amber before going straight to red, do now?

What do gaming and mining companies that want to flee the system, a water utility that wants to swallow the system and numerous others with clients and millions of dollars to be made do now?

And, oh yes, what do ratepayers, who may be thrilled with the nearly 50 percent cut in the rate increase but now facing a potentially disappearing utility and a reactive and relatively clueless political class, do now?

Before anyone descends into panic or ascends to ecstasy over the vote by the Public Utilities Commission to slash $437 million out of the power company's $922 million rate increase request, let's remember: We are much closer to the beginning of this story than the end. And it has been a long tale, one characterized by an economic environment almost as mercurial as the political atmosphere.

And this is one of those sagas where a hero is hard to find. No one is clean in this one -- the company, its critics, and, least of all, the opportunistic politicians who care little about the ratepayers but much about their own popularity ratings.

The PUC decision, which could have been worse since Commissioner Richard McIntire wanted to deny the entire request, has stripped the utility naked. Actually, it's been more of a flaying.

For anyone who took the time to sit through the entire hearing or read most or all of the 4,000 pages of transcripts -- and I guarantee few or any of the pols who mouthed off and will mouth off did either -- found a very disturbing record. Lawyer after lawyer peeled away any pretense of a well-oiled machine to reveal a disassembled executive team where risk management had become an oxymoron and whose eyes were more on the merger ball than on protecting ratepayer interests.

The picture was an ugly one for the utility, which long before the hearing had lost credibility because of an arrogant persona and politicians who generally were operating out of ignorance but tapping into a geyser of bile in the electorate.

The combination left the PUC little choice, as the process became hopelessly politicized:

And, yet, reality looms. Let's not forget this, either: The company spent the money. It's gone. It must pay back its creditors. And now it has to find almost half a billion dollars to pay off suppliers. What's a utility to do?

Voluntarily reorganize? Perhaps. That's what the goal has been, I think, for many of Nevada Power's critics -- to, as Consumer Advocate Tim Hay put it Friday, force the company to become leaner and meaner and to recognize, that, as PUC boss Don Soderberg wrote in his original order that was augmented by the full board, it had made "colossal" errors.

Scorch the earth? The utility, I suppose, could sue and argue that state government and private interests had conspired to deprive Nevada Power of the ability to do business. But where does that get it?

The company also has to worry about shareholder lawsuits that might just quote McIntire's Keystone Cops characterization or some of Soderberg's harsh language. And gaming and mining companies want to complicate the utility's woes by fleeing its stewardship, although in a little-noticed action Friday regulators prevented Barrick from leaving just yet. But these megacompanies on the Strip or those with strip mines won't sit still -- they want to get out, and a law passed by compliant lawmakers, the same ones who opened the door for the Nevada Power billion-dollar request, allows them to do so, so long as the companies can make the case.

Finally, what happens to what the utility says has been its noble goal throughout the last couple of years -- will the lights stay on? Clearly, as other jurisdictions have shown, a bankrupt or financially crippled utility does not leave cities in darkness.

But what if Wall Street reacts adversely, as it surely will, to this decision and hamstrings Nevada Power's ability to buy power? What happens to this so-called blend and extend deal designed to benefit ratepayers that the company announced about 10 days ago? What if the utility's ability to operate falls apart in the wake of questionable management practices that may have resulted in the regulatory equivalent of capital punishment?

Then what?