Nevada Power plans 5.3 percent rate cut

Thursday, Nov. 14, 2002 | 11:10 a.m.

Fresh off a quarterly earnings report that showed a decline in profits, Nevada Power Co. said it would file a request today with state regulators to decrease power rates.

The electric utility said it would file today with the Public Utilities Commission of Nevada an $81 million, 5.3 percent rate decrease that would lower the average residential customer's monthly bill by $6.39.

Utility company executives said there are two separate filings going to the PUC, the larger being a deferred energy filing that has been planned for months. Under state law, the company is not allowed to make a profit on fuel and energy costs, which must be accounted and adjusted annually.

The accounting period ended Sept. 30, and the utility had 45 days in which to file its request. Walter Higgins, chief executive of Nevada Power's parent company, Sierra Pacific Resources Inc., said the timing of the filing had nothing to do with last week's approval of an advisory question in the Nov. 5 election.

Clark County voters passed an advisory question in the election, with 57.4 percent of the voters agreeing that a government agency should be allowed to run the electric utility.

Sierra Pacific's stock price was up 29 cents to $6.03, a 5 percent gain, in New York Stock Exchange trading at midday.

Under the rate case -- two boxes of documents scheduled to be filed today -- single-family residential customers could anticipate a 5.6 percent decrease on their bills. The company said residential customers using 1,250 kilowatt hours a month would see their monthly bills decrease from $116.08 to $109.69.

A second filing expected to be made today would seek to adjust rates to recover $1.9 million the company invested in conservation programs. If both rate adjustment cases are approved, the average customer's bill would be reduced with the company forecasting a 5.3 percent decrease for all users, including commercial users, and a 5.6 percent decrease for residential users.

Under state law, the PUC will have six months to review the company's filings, schedule hearings, accept testimony and make a decision on the request, meaning that rate adjustments wouldn't occur until May or June at the earliest. Intervenors in the case could seek an even larger rate cut.

Higgins said reduced energy costs are behind the company's request.

"The western power market has changed dramatically over the last couple of years," Higgins said. "Supply is up and demand is down, allowing us to file this request for reduced rates."

PUC regulators who will be deciding the outcome of the request normally don't comment on requests until a decision is reached.

One of the intervenors in the rate case would be the state attorney general's office's Bureau of Consumer Protection.

State Consumer Advocate Timothy Hay, reached by telephone in Chicago, said Wednesday that it would be difficult to comment until the full details of Nevada Power's proposed rate decrease become known. But he said the announcement of a proposed rate decrease was somewhat unexpected.

"It's somewhat surprising considering the financial distress the company has been in over a period of time and because they've been borrowing money at very high rates," Hay said.

Officials with the Southern Nevada Water Authority said the announcement would have no bearing on its decision to offer $3.2 billion to acquire the utility.

Water authority spokesman Vince Alberta said Wednesday he was not surprised by the proposed Nevada Power rate decrease.

"It has been expected," Alberta said of the proposed rate decrease. "Energy costs have been going down and this is something they have to do, something they're required to do. Considering the significant reduction in energy prices the only surprise is that it's not more of a reduction."

The water authority has said it could reduce electricity rates by at least 20 percent immediately because its superior credit rating would allow the public agency to finance debt at much lower rates than that paid by Nevada Power. The water authority has an investment-grade credit rating, while Nevada Power's credit remains in "junk" status.

"We feel confident that based on projections of energy costs we could reduce the rates beyond the 20 percent that we've previously announced," Alberta said. "Our offer is definitely still on the table. We could offer the reduction in energy costs on top of the 20 percent reduction we have already announced."

Earlier today Sierra Pacific Resources reported third quarter net income of $79.4 million, 78 cents a share, on revenues of $1 billion. That compares with net income of $80.4 million, 89 cents a share, on revenues of $2 billion for the same quarter in 2001.

The company said earnings were affected by customer growth and above-normal temperatures in July. Higgins said the results were indicative that the company is progressing in its bid to restore its financial health and company officials have completed refinancing credit facilities.

For the first nine months of 2002, Sierra Pacific showed a net loss of $268 million, compared with net earnings of $51 million for the same period a year earlier. The loss was attributed to regulators rejecting $434.1 million in deferred energy costs for Nevada Power and $53.1 million in deferred costs for the company's Northern Nevada utility, Sierra Pacific Power Co.

The company has taken the PUC's rejection of those costs to court.