Advocate says Nevada Power still imprudent

Kevin Rademacher

Friday, March 7, 2003 | 11:13 a.m.

Nevada's consumer advocate says the $81 million rate cut proposed by Nevada Power Co. is not enough and rates should be slashed by another $292 million.

Advocate Tim Hay said Thursday that the company was imprudent in fuel and purchased power purchases between October 2001 and September 2002. Customers should not pay for those allegedly bad decisions, he said.

Hay made similar accusations last March when Nevada Power was seeking permission to recover nearly $1 billion in power and fuel costs for the seven months ending in September 2001. The PUC cut that request by $434 million -- sending Nevada Power and its parent company, Sierra Pacific Resources, into a financial tailspin.

"As far as the business practices that resulted in imprudent power purchases, we have seen little or no change (from last year)," Hay said.

Jack Leone, a Nevada Power spokesman, said the company would not comment on specifics of Hay's claims until it sees the advocate's formal testimony. The company's management practices, however, have been reviewed since last year's rate case, he said.

"Risk management is very important," Leone said. "The company diligently looked at everything that came out of the hearings last year -- risk management was a big part of that."

This year, Hay's Bureau of Consumer Protection claims that Nevada Power's Trading Group violated the strategies advised by the company's Risk Management Committee. That move "caused purchased power costs to increase by approximately $147 million," Hay said in a statement Thursday. His recommendation is to be formally filed with the Nevada Public Utilities Commission today.

He also said the company did not secure available long-term contracts that would have saved about $85 million, and the company botched its natural gas transactions at a cost of $60 million.

Nevada Power filed for the rate decrease in November as part of an overall plan to recover $195 million over three years. Lower ongoing fuel and purchased power costs will result in a rate decrease in the first year. The move is expected to reduce rates by 5.3 percent for all users, including commercial users, and 5.6 percent for residential customers.

Filings are due this afternoon from intervening parties, including Hay's Bureau of Consumer Protection. Other parties expected to file opinions on the case are the U.S. Department of Energy, MGM MIRAGE, Nevada Energy Buyers Network, Southern Nevada Water Authority and the Utility Shareholders Association of Nevada.

Nevada Power has two weeks to file rebuttal testimony and hearings before the PUC are scheduled to begin March 31.

Wall Street analysts are watching the current rate case closely. Both major U.S. credit rating firms pointed to the current rate case as a barometer of the company's health.

Swami Venkataraman, a utilities analyst with Standard & Poor's, said the case will indicate how successful the company has been in repairing its relationship with regulators after last year's huge disallowance.

"The PUCN's ruling will indicate any changes in the commission's posture toward Nevada Power, a crucial determinant of business risk," he said in a recent report.

The stock of Sierra Pacific traded at $3.09 this morning, down 2 cents.