Thursday, Sept. 19, 2002 | 11:07 a.m.
Southern Nevada Water Authority general manager Pat Mulroy told local developers, architects and land use planners that her agency's bid to acquire Nevada Power Co. amounts to a refinancing plan that will save ratepayers lots of money.
She also pulled no punches -- without mentioning Nevada Power by name -- when she told the audience at an Urban Land Institute luncheon at the Rio on Wednesday that the Water Authority works well with the public and does not suffer from negative publicity.
In contrast with vociferous complaints that were aired at public meetings earlier this year when Nevada Power wanted to raise rates, Mulroy said the Water Authority heard no opposition when it wanted to expand water facilities in Henderson.
"It was never acrimonious," Mulroy said. "You never read in the paper that residents were fighting the authority in their neighborhood. We haven't spent millions of dollars in court fighting neighbors over the need for facilities."
Nevada Power President Pat Shalmy was originally scheduled to appear with Mulroy in what could have had the makings of a fiery debate. But Shalmy pulled out at the suggestion of company advisers and was replaced by Bill Brier, a spokesman for the Edison Electric Institute, a Washington lobby group for investor-owned utilities.
Brier criticized the Water Authority's plan to finance its proposed $3.2 billion acquisition of the Las Vegas utility through bonds that would be paid off by ratepayers. The bid covers $1.2 billion for Nevada Power's assets and $2 billion in debt.
"You shouldn't just change nameplates on a door," Brier said.
Instead of buying Nevada Power, he said, the money would be better spent building additional power plants and upgrading transmission lines to help ensure a reliable energy supply. He said this was critical to guard against the prospect of another Western power crisis that drove wholesale energy prices skyward in 2000 and 2001.
Brier said the upgrades are necessary because growth has put a strain on the power grid that serves Nevada and 10 other Western states. He said California will consume much of the spare energy if its economy rebounds.
"You have a power grid that isn't adequate to meet that demand and you do not have adequate supply to serve the region," Brier said. "You need to make additional investment in electricity infrastructure to allow you to get electricity you can afford."
Uncertainty regarding the financing plan was one of the main reasons Nevada Power parent Sierra Pacific Resources cited for rejecting the water authority's offer last week.
But Mulroy said the water authority believes it could reduce electricity rates by 20 percent is because its "double A" bond rating allows it to pay off debt cheaper than can Nevada Power, whose credit rating is in "junk" status. The water authority also benefits by not having to pay federal taxes, she said.
"All this is is a refinancing plan," Mulroy said. "When you take equity at 10 percent and debt at 7 percent and refinance it at 5 percent, have you made money? Yes.
"We are financing debt, much of which is due to the creditworthiness (of Nevada Power). This is basic finance 101. You don't need additional revenues."
The seven-member water authority board, made up of elected officials from Clark County and the cities of Las Vegas, North Las Vegas, Henderson and Boulder City, was scheduled today to discuss how it planned to respond to Sierra Pacific's rejection.
Mulroy gave no hint of what that response would be. But she spent much of the hour taking the offensive, including the assertion that the water authority has completed $2 billion worth of water facilities in recent years, far more than Nevada Power has spent on capital improvements. She said public financing would ensure that needed electric facilities get built.
"We do need to build additional power facilities," Mulroy said. "How does Southern Nevada develop an energy plan? We've been waiting here for 12 years for someone to develop an energy plan."
Mulroy vowed that the water authority would develop an energy plan with input from developers if it purchases Nevada Power.
She said needed electric facilities would be built "at 5 percent debt, and not 7, 10 or 14 percent debt."
Brier said Southern Nevada has been hurt by a lack of energy planning. Sierra Pacific Chairman Walt Higgins has aired similar concerns, blaming the state energy resource plan for emphasizing low-cost energy over the reliability of energy supply.
"The thing that's missing here is long-term energy planning," Brier said. "You don't have any long-term energy policy that addresses supply. You need to protect yourself."
The luncheon was organized by the Urban Land Institute's Las Vegas District Council. The nonprofit organization focuses on research and education related to land use issues.
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