PUC criticizes Nevada Power ‘yellow alert’

Wednesday, May 8, 2002 | 11:01 a.m.

A preliminary report prepared by staff of the state Public Utilities Commission released Tuesday criticized aspects of the April 14 "yellow alert" issued by Nevada Power Co. but stopped short of saying that the warning was unnecessary.

The cash-strapped utility issued the alert after forecasting that unseasonably warm temperatures that day made it possible that electricity demand in the Las Vegas Valley would exceed supply. Nevada Power officials said at the time that the company's dire financial condition made it difficult to buy power on the spot market.

No blackouts resulted from the alert, but the PUC staff recommended that Nevada Power officials explain why they initially issued that alert rather than a lower-level emergency warning. The staff was also critical of the utility's record-keeping with regard to the alert and the way it tracks cash flow.

"(Nevada Power's) apparent lack of daily cash balance and cash forecasting reports reflect a serious failure in managing cash flow requirements, particularly for a troubled utility company," the report stated. "At a minimum, staff recommends that the commission require NPC to rectify this reporting deficiency immediately."

Staff wants the answers to these and other concerns when the PUC conducts a May 20 workshop in Las Vegas on the issue. Company spokeswoman Sonya Headen said Tuesday that Nevada Power is reviewing the report and will have a response by Friday.

The report praised the company's short-term weather forecasting ability as it pertains to projected electricity demand. Staff also concluded that the company followed its written emergency protocols and that the warm weather resulted in "higher than expected" customer demand.

But Nevada Power must justify why it issued a yellow alert rather than a lower-level energy emergency alert, the report stated. An energy emergency alert means that electricity shortages could pose a future problem while a yellow alert normally means more imminent problems, such as an outage to a power plant or transmission line. A red alert means that the utility is unable to meet demand.

The staff also wants Nevada Power to submit reports on any problems it may have getting natural gas to its gas-fired generating plants.

"Notwithstanding the company's representation that financial difficulties contributed to the (yellow alert) incident, it is possible that the company's financial difficulties may contribute to problems accessing adequate levels of capacity and fuel in the future," the report stated.

Nevada Power officials said the company was placed in financial jeopardy after the PUC ruled on March 29 to give the utility only $485 million of the $922 million it is seeking from ratepayers for energy used last year. Nevada Power filed a lawsuit against the PUC in Carson City District Court in an attempt to recover the full $922 million.

The PUC decision sent the stock of Nevada Power parent Sierra Pacific Resources tumbling and also lowered the credit ratings of the corporation and its subsidiaries from investment grade to junk status.

The staff was unable to conclude whether an April 13 warning from the company for customers to conserve energy and the yellow alert issued the following day had anything to do with Nevada Power's creditworthiness.

"However, some evidence exists that NPC's ability to procure resources was impeded by NPC's perceived creditworthiness," the report stated.