Utility owner narrows loss

Kevin Rademacher

Monday, March 8, 2004 | 11:25 a.m.

Higher interest costs and regulatory disallowances contributed to a $19.8 million fourth-quarter loss for Sierra Pacific Resources Corp., parent company of Nevada Power Co.

The loss announced today, which amounted to 17 cents per share, was narrower than the $39.5 million, or 39 cents a share, lost in the same 2002 quarter.

Walter Higgins, Sierra Pacific's chief executive, told analysts in a conference call this morning that the results "are an improvement, but still not satisfactory."

Revenue for the company was $614.8 million for the quarter, down from $630.5 million for the same 2002 quarter.

Quarterly revenue at Nevada Power was $359.3 million, up from $355.1 million for the year-ago quarter. Nevada Power's loss narrowed to $5.9 million from $19 million for the same 2002 quarter.

Interest charges on long-term debt for Nevada Power Co. were $142.1 million in 2003, up more than 24 percent from the previous year and a concern for analysts on the conference call. Additionally, Nevada Power recorded nearly $28 million in interest charges related to its dispute of a $338 million bankruptcy court ruling in favor of Enron Corp.

In light of those costs, Higgins said efforts are in place to improve the firm's credit quality.

"The restoration of the financial health and credit quality of the company is the most important priority, along with customer service," Higgins said. "But it does take time."

The company has seen its interest costs rise since its credit was lowered to junk status in 2002 as part of the fallout of the Western energy crisis. Soon after, the Southern Nevada Water Authority made an offer to buy Nevada Power, saying it could lower rates with improved credit quality and lower interest charges.

Nevada Power also wrote off $46 million in fuel and purchased power expenses that state regulators ruled the company could not collect from ratepayers because of imprudent business practices. Sierra Pacific Power of Reno wrote off another $45 million.

The expenses also concerned analysts, who pointed to two rate cases in which Nevada Power is seeking about $300 million in rate increases. The company is expecting a ruling on those requests later this month.

Higgins said the company has taken the criticism in past regulatory cases to heart.

"We listened very carefully to what the (Public Utilities Commission) did and did not like about the way we do business," Higgins said in the conference call.

On the positive side for Nevada Power, the costs for purchased power fell more than 40 percent to $744 million. That cost was $1.2 billion in 2002 and more than $3 billion in 2001. The lower costs were attributed to lower short-term energy prices and a less volatile market as the effect of the Western energy crisis continue to fade.

In the conference call, Higgins said the firm will act on a resource plan, approved last year by state regulators, and build two new power plants. That will reduce the amount of energy Nevada Power has to buy on the open market. The firm currently generates only about 40 percent of the power it needs to serve customers.

"We will work to correct the imbalance in our supply which now ... relies too much on purchased power," Higgins said.