New power plant costs questioned at meeting

Kevin Rademacher

Friday, Sept. 12, 2003 | 10:54 a.m.

Despite pleas from the company executives and state regulators, just four Nevada Power Co. customers spoke Thursday afternoon at a meeting to discuss a multi-million resource plan proposed by the utility.

Nevada Power filed its resource plan in July. The document asked for, among other requests, permission from the state Public Utilities Commission to build two power plants at a cost of more than $450 million.

"We felt it is important with the rate cases we've had the last few years to explain the resource planning process," said PUC Chairman Don Soderberg. "The rates we pay today are often decided by resource plans made sometimes six or seven years ago."

Over the last two years, Nevada Power has sought the recovery of more than $1 billion in fuel and purchased power costs. Nearly $500 million of that has been denied, pushing the utility into financial turmoil.

At the meeting, Michael Yackira, executive vice president for Strategy and Policy with Nevada Power's parent company, Sierra Pacific Resources, pointed out that the company currently only generates about 40 percent of the electricity needed to meet customer demand. The balance of that electricity is purchased on the open market, which was subject to soaring prices during the Western energy crisis.

The two new plants, given the utility's rapid customer growth, will be needed just to maintain that balance.

Customers expressed concern over the cost of new power plants and the environmental impact of new plants.

Peggy Maze Johnson, a representative of Citizens Alert, which has battled the proposed Yucca Mountain nuclear waste dump, said aggressive energy conservation has worked in other markets and should be taken more seriously by Nevada Power.

"I'm sorry we don't see anything that aggressive with Nevada Power," said Johnson, who also expressed support for a shift to publicly owned utilities.

Thelma Clark, an AARP representative, also said the utility should examine power plants that do not use natural gas as a fuel source.

The cost of natural gas has soared in recent years since most of the new plant built in the last decade have been gas fired.

Coal plants, Yackira said, fell out of favor in the 1980s because of environmental concerns and higher construction costs. The new resource plan, however, asks the PUC for permission to $500,000 to research the feasibility of building a new coal plant in Southern Nevada.

Yackira said the cost of a coal plant is about double the price of a natural gas fired plant, but fuel costs are less expensive and stable. He also said that new technology has made coal plants cleaner, reducing environmental concerns.

While he did not speak at the meeting, Nevada Consumer Advocate Tim Hay attended and cast doubt on the resource plan after the testimony had concluded.

"We've got substantial concerns whether the plan is even viable considering the financial condition of the company," he said.

Last month, a U.S. Bankruptcy Court judge in New York ordered Nevada Power and its sister company, Reno-based Sierra Pacific Power Co., to pay an Enron Corp. subsidiary $312 million for terminated power contracts. The move caused the nation's leading credit rating agencies to lower their outlook on the parent company.

Sierra Pacific Resources already suffers from a junk credit rating, increasing the cost of capital available to the company for projects such as construction.

Hay and the other involved parties are scheduled to file formal testimony on the resource plan with the PUC by Sept. 19. Hearings before the commission will begin Oct. 14 with a final ruling expected by mid-November.