Thursday, Sept. 12, 2002 | 11:16 a.m.
Gearing up for a debate on the future of Nevada Power, company executives criticized government-owned utilities and said they were building a coalition of support to fight a ballot question about public power.
Sierra Pacific Resources is reviewing a request by the Southern Nevada Water Authority to negotiate for the purchase of Nevada Power Co., a Sierra Pacific subsidiary.
Sierra Pacific Chairman Walter Higgins said the review should be done by next week. He told the Las Vegas Sun editorial board Wednesday that his company will then respond to the request sometime thereafter, with potential responses ranging from agreement to negotiate to outright rejection of the water authority's request.
Higgins also said his company still intends to fight a proposed ballot measure for the November general election that will allow Clark County voters to decide whether they want Nevada Power replaced by a public power authority.
As the company finalizes its review, company executives have tried to build support for their position.
Reviewing a potential offer to sell the company and a ballot measure that will gauge public support of a potential government buyout of the utility, company executives were critical of the Los Angeles Department of Water and Power, the agency public power advocates use to support their position.
Higgins said the municipal utility was charging much higher rates than were neighboring investor-owned utilities in the years leading up to the Western energy crisis because of power plant costs.
When the city-run utility had a glut of power during the energy crisis, Higgins said it could have helped struggling California electricity customers elsewhere more than it did.
"They screwed the rest of California," Higgins said. "It's terrible what they did."
Nevada Power President Pat Shalmy, who accompanied Higgins, said he is in the process of trying to form a coalition to help the utility fight the November ballot measure.
Shalmy identified the Las Vegas Chamber of Commerce, Nevada Taxpayers Association, Sprint and Cox Communications as possible members of the coalition and said a political action committee likely would be formed to raise and spend money on a campaign. Shalmy said part of the campaign would also involve "image building" on Nevada Power's behalf.
Regarding the potential negotiations, the water authority, Nevada Power's largest customer, decided last month to make a $3.2 billion offer to buy the embattled Las Vegas electric utility. But Higgins said the letter he received from water authority general manager Pat Mulroy did not, in his opinion, constitute a formal bid for Nevada Power.
"I would like to report for the record that no offer was made," Higgins said. "The letter we got is that they would like to negotiate but there was no offer. It does not bind the sender in any way.
"We said we'd take it seriously and we have. It takes time. It has to be done right. And it's important to know the effect on our customers and the effect on our employees and shareholders."
Water authority spokesman Vince Alberta said, "We look forward to their response."
Higgins said the water authority has sought permission to review Nevada Power records, something his company has not yet granted. He said that permission likely will be granted if Sierra Pacific decides to negotiate but also said that "it's a two-way street" and that his company would want to review the water authority's records.
"We'd like some assurance that we're not just talking to a hollow shell," Higgins said. "Would you sell your house to someone who did not have the ability to complete a sale? People should not be making $3 billion decisions based on rhetoric. They should make them based on facts."
Alberta said the water authority would welcome scrutiny of its records.
"Our financial records are public documents," he said. "We're a public agency."
Proponents of public power say that government-run electric companies generally charge lower rates than investor-owned utilities. But Higgins said that over the past 20 years public power rates have risen while rates of investor-owned utilities have declined.
In Nevada Power's case, rates have climbed from about 6 cents per kilowatt hour prior to the 2000 Western energy crisis to nearly 10 cents per kilowatt hour today, Higgins conceded. But he blamed the energy crisis in part on market manipulation by the likes of bankrupt Enron Corp., a Houston power wholesaler that is involved in litigation with Sierra Pacific over a prior energy contract.
On other fronts, Higgins stated that:
There had been speculation within the electric utility industry that Southern Nevada customers would face possible blackouts this summer because of Nevada Power's battered credit ratings, which make it more expensive to purchase energy from wholesalers. Nevada Power's credit ratings were lowered to "junk" status after the company received approval from the state Public Utilities Commission to collect only $485 million of the $922 million it sought for energy used last year.
Although energy prices have declined in recent months, Higgins said it is possible the markets could once again become volatile by 2004. He said that could happen if there is another shortage of hydro power in the Pacific Northwest coupled with a stronger economy, which would increase electricity demand and reduce supplies.
But Higgins said that even if Enron wins the lawsuit, there is practically "zero" chance it will get the full amount it seeks.
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