Rate deal lauded as step forward for Nevada Power

Kevin Rademacher

Thursday, Feb. 24, 2005 | 10:53 a.m.

The agreement reached by the parties in Nevada Power Co.'s recent rate case was being hailed on Wednesday as another turning point in the once-embattled utility's relationship with regulators, customers and other critics.

"I'm extremely pleased with the fact that the parties came together and reached an agreement on this case," said Michael Yackira, chief financial officer for Nevada Power's parent company, Sierra Pacific Resources.

Yackira was also pleased that the deal drew some praise from financial market analysts. He said the deal should serve as a sign that the company is still on course for improved financial health.

"The Street continues to look for indication that the improvement they have seen in recent years is still there," he said. "I think this is great news, and I hope the financial markets see this as great news as well."

Jake Mercer, a utilities analyst for Piper Jaffray & Co., said he was impressed with the deal.

"It certainly does look like a positive for the company," he said.

Swami Venkataraman, a credit analyst for Standard & Poor's, said he was less concerned about how the company recovered its costs -- whether its in a stipulated deal or a full-blown rate case -- as long the money was recovered.

"It's very important for them to be able to recover their costs in a timely fashion," he said, adding that the situation has been improving for Nevada Power. "It certainly has been a concern, but it has definitely been an improvement, especially over the last couple of years."

The deal must still be approved by the three-member Public Utilities Commission. It is expected to be considered at a March 16 meeting.

The deal will allow the Las Vegas electric company to recover essentially all of the $115.9 million past fuel and purchased power costs it had sought in the rate case filed in November with the PUC.

The agreement, however, modifies the Las Vegas electric company's original proposal that sought to delay the increase for a year, giving customers the opportunity for a small rate decrease on April 1 as old balances expired. That strategy, critics argued, would lead to large interest charges -- by some accounts $15 million -- that would ultimately be paid by customers.

Under the new plan the company would be allowed to recover its past fuel and power costs over two years beginning on April 1.

Under terms of the stipulation, a $48 million credit that will be amassed through the collection of a previous balance through March 31 will be used to pay off another old balance on April 1, allowing for the smaller rate increase.

That will leave only two balances for past fuel and power costs -- the current balance and a balance established in 2004 -- on the books, and both will be paid off in 24 months.

Under the agreement, which is expected to be approved by the three-member PUC on March 16, the average residential customer would see a monthly rate increase of 0.76 percent -- or 93 cents -- from $122.33 to $123.26.

Nonresidential customers are expected to see a slight rate decrease. The difference between residential and non-residential rate movement is attributed to higher peak demand for residential air conditioning during peak summer periods, Yackira said.