Consumer advocate skeptical of Nevada Power expansion plan

Kevin Rademacher

Wednesday, Oct. 15, 2003 | 11:04 a.m.

Regulatory hearings on a resource plan proposed by Nevada Power Co. began predictably on Tuesday with a barrage of skeptical questions from the state Bureau of Consumer Protection.

Nevada Power on July 1 filed the plan that proposes, among other things, the construction of two natural gas-fueled power plants at a cost of more than $450 million. The Las Vegas utility also seeks permission from the state Public Utilities Commission to study the feasibility of building new coal-fired power plants.

The company, which currently produces only about 40 percent of the power it needs to serve the Las Vegas area during peak demand months in the summer, said it needs new generation capacity to reduce the dependence on buying power on the open market.

"It is certainly not in our desire to become more dependent on purchased power than we are today," said Michael Yackira, executive vice president for strategy and policy for Nevada Power's parent company, Sierra Pacific Resources.

At the hearing, however, the company was asked if it had the financial strength to embark on such expensive projects.

Christopher Van Dyck, an attorney with the Bureau of Consumer Protection, questioned Yackira's unwillingness to categorize Nevada Power's financial position as "unhealthy."

"It's not healthy, but it's not unhealthy either," Yackira responded. "To have a company that is not investment grade is not good for anyone."

He emphasized, however, that the company is currently capable of meeting all of its customers' needs.

Van Dyck, in turn, pointed to recent statements by the company indicating that recent events in an ongoing battle with Enron Corp. could lead to bankruptcy for Nevada Power.

A bankruptcy court judge in New York has ordered Nevada Power and its sister company, Sierra Pacific Power Co. of Reno, to pay Enron $336 million for terminated contracts signed during the Western energy crisis.

Nevada Power would be responsible for about $200 million of that judgment. The companies have appealed to the Federal Energy Regulatory Commission. Executives have indicated on several occasions that Sierra Pacific could be pushed into bankruptcy if the judge does not allow the utilities to post a bond for the judgment during appeals.

Van Dyck asked Yackira to read excerpts from a declaration filed with FERC by Richard Atkinson, chief financial officer of Sierra Pacific Resources. The statement outlined the negative effects the case could have on the company.

"Isn't fair to say, based on this declaration, ... that the company's financial situation is precarious?" Van Dyck said.

Yackira responded: "If the judgment isn't stayed."

Hearings are scheduled to continues through Friday. The PUC is scheduled to make a ruling on the resource plan on Nov. 13.