Utility sees power shortfall in 2004

Kevin Rademacher

Wednesday, July 2, 2003 | 11:03 a.m.

Nevada Power Co. on Tuesday proposed a combination of long-term contracts and new generation plants to meet the growing needs of Southern Nevada electric consumers.

In its 2003 Integrated Resource Plan, filed with the state Public Utilities Commission, Nevada Power projected an electric supply shortfall of 2,068 megawatts beginning in 2004. That shortfall is expected to grow to nearly 3,000 megawatts by 2006.

In the plan, the company seeks permission from the PUC to secure long-term power purchases to fill the void.

"By filling these requirements primarily with long-term resources, the company can significantly reduce price volatility compared to continued reliance on short-term and intermediate-term energy purchases," the company's filings said.

Nevada Power also asked for permission to build a $44 million, 80-megawatt power plant on the existing Harry Allen power plant site about 15 miles north of Las Vegas. That plant, the company's filings said, will be needed online prior to the 2006 summer peak.

The utility also is seeking approval to build a $414 million, 520-megawatt power plant at the Harry Allen site that would be in service prior to the 2007 peak demand period.

One megawatt of electricity will serve 750-1,000 homes.

The company also is requesting approval for millions of dollars in upgrades to its existing generation and transmission system.

The plan must be approved by the PUC before any work on the proposed projects can begin. No hearing dates have been set.

Michael Yackira, executive vice president for strategy and policy with Nevada Power and its parent company, Sierra Pacific Resources, said in testimony filed in support of the plan that the company's strategies have changed dramatically since the last resource plan was filed three years ago.

"In light of the California debacle, the Nevada Legislature decided in 2001 that the experiment of full deregulation of the industry was a failure, rescinded the requirement to divest generation and also limited the retail competitive landscape," Yackira said in his testimony.

"Since this is the first full resource plan filed by Nevada Power since these events, it reflects a very different approach to filling the growing need for electricity."

The challenge for the company will be meeting the capital requirements necessary to execute the projects. While the company's stock price has improved in recent weeks, Nevada Power still faces high interest costs as its junk credit rating lingers.

Receiving prior regulatory approval for the projects will help ease investor fears, said Swami Venkataraman, a utilities analyst for Standard & Poor's.

"To the extent that they can execute on that plan, it would reduce risk for investors," he said.

Venkataraman said that having the proposed plants a few years in the future could work out well for Nevada Power.

"Most people agree by now that they are past their worst period," he said. "The cost of capital is definitely higher now as opposed to a few years down the road."