Las Vegas Sun

March 28, 2024

Nevada Power won’t seek further protection

Nevada Power President Pat Shalmy said the financially strapped utility will not seek to extend a state law that protects it from a hostile government agency takeover.

But Shalmy said the Las Vegas electric company is on the mend financially and remains "not for sale."

In an interview Monday on the television program "Face to Face With Jon Ralston" on Las Vegas ONE, a joint partnership of the Las Vegas Sun, KLAS-TV and Cox Communications, Shalmy said he was confident the utility has "certain protections in the law" that would make it difficult to complete a hostile takeover of Nevada Power. He did not elaborate, however.

The Southern Nevada Water Authority, a public agency, has made a $3.2 billion offer to purchase Nevada Power, but the bid so far has been rejected by Nevada Power parent Sierra Pacific Resources.

The water authority has argued that it can provide electricity at lower cost to consumers because it has a superior bond rating that allows it to borrow money at much lower rates than can the utility. Nevada Power has argued that it has provided reliable service to Southern Nevadans for nearly 100 years and that there is no evidence the water authority could do any better.

One hurdle to that possible acquisition is thought to be Senate Bill 425, which was enacted in 2001 and expires on June 30. SB425 prevents government agencies from a hostile takeover of any privately owned utility, including electric, natural gas and telecommunications businesses.

Shalmy told Ralston that Nevada Power will not attempt to persuade the Nevada Legislature this session to renew SB425.

"There are certain laws on the books now that make it very difficult for someone in a hostile way to take over this company," Shalmy said. "I would rather not go to the Legislature with something contentious right now."

Allowing SB425 to expire "simply removes something that allows us to have conversations with people should they want to have conversations with us," Shalmy said. "We think we have certain protections in the law if they want to take us over in a hostile way so we're not particularly worried about that situation."

Nevada Power spokesman Jack Leone said today that legal advisers told Shalmy that other protections exist beyond SB425 that would make it difficult for the water authority or anyone else to initiate a hostile takeover. Leone said he had no immediate information on the nature of those protections.

But state Consumer Advocate Timothy Hay said he disagreed with Shalmy and that no other laws exist beyond SB425 that would protect Nevada Power from a possible takeover.

"That was the intent of SB425 because they feared a hostile takeover," Hay said. "Without that statute a hostile takeover would be an option."

Shalmy said that Nevada Power was not "afraid" of the water authority and that the utility was getting stronger financially. When asked by Ralston if the company would be up for sale in the foreseeable future, Shalmy, who was hired last year, said:

"I don't think it will be. I've signed up for the long term to work for Nevada Power, not for a government agency or for another company."

Water authority spokesman Vince Alberta said he agreed with Shalmy that SB425 should expire but added that it was too early to determine whether that would make it easier for the agency to acquire the utility.

"I don't think it changes the offer on the table," Alberta said. "We certainly don't disagree with him on SB425. We think it's the right thing to do to let the bill sunset."

Alberta said it is difficult to determine the immediate impact of allowing the law to expire because Nevada Power faces numerous issues over the next six months having to do with its power acquisitions.

"There are a lot of events on the agenda between now and then," Alberta said of the June 30 expiration date. "They have some tremendous milestones coming up, including legal and regulatory decisions, that could shape that company at least short-term and into the future.

"What the public is looking for is long-term reliable energy and reasonable rates and we think we can provide that."

Peggy Maze Johnson, chairwoman of a citizens group that advocated passage last November of an advisory ballot measure having to do with electricity, said that allowing SB425 to expire would be good for local consumers. Question 14, the Clark County ballot measure that passed by a margin of 57 percent to 43 percent despite opposition financed by Nevada Power, asked voters whether they would favor a nonprofit agency providing electricity.

"I hope they (Nevada Power) really mean it about SB425 because it would give the ratepayers the opportunity to have another interested party come in and see if they want to take it over," Johnson said. "That's a good thing for the citizens here."

Although Nevada Taxpayers Association President Carole Vilardo was chairwoman of the effort to defeat Question 14 -- a position she said she took because the ballot measure was vaguely worded -- she said her organization remains neutral on whether SB425 should expire.

Vilardo took credit for that law, saying she pushed for it two years ago because the possibility of deregulating retail electricity had tax implications that had not been clarified in state law.

But she said two proposed bills that were authored by an interim legislative committee and will be introduced this session should make those clarifications. One bill draft addresses the issue of taxing electricity providers such as brokers who operate in other states. The other bill draft would allow local and state governments to continue to collect their fair share of taxes should a government agency such as the water authority take over a utility.

The latter bill draft is significant because Nevada Power contributes about 2 percent of the property tax revenue the Clark County School District uses to retire its construction bonds, Vilardo said. She has said that one of her main concerns about a possible water authority takeover of Nevada Power is that local governments such as the school district would lose a significant portion of tax revenues under existing law.

"If this goes through, it would definitely take care of one of my major concerns," she said.

On another legislative front, Shalmy told Ralston that Nevada Power wants to work with lawmakers to give the company more flexibility in the way it plans its purchases from other energy providers. The company currently submits a three-year power purchasing plan to state regulators but would like to have an annual plan in place to deal with volatile energy markets, Shalmy said.

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