Sierra Pacific Fights NV Power Deregulation Efforts
Alleging the law that created the framework for a deregulated
electric market in Nevada will be detrimental and unfair to their
stockholders and their customers, Nevada Power and Sierra Pacific
Power filed in federal court last week to have the law declared
"Restructuring in the state of Nevada is a very complex issue,"
said Michael R. Niggli, CEO Sierra Pacific Resources. "From the
beginning we have supported competition in our industry, but we
want to make sure it is done right. Competition should benefit all
customers, both large and small, provide a level playing field for
all competitors, and not harm company shareholders."
The parent company for the utilities, Sierra Pacific Resources,
said a host of issues led them to file against the legislation.
Chief among these issues are two Public Utilities Commission of
Nevada (PUCN) decisions, issued over the past two months, that went
against Nevada Power in its attempt to recover fuel and purchased
power costs through its rates.
The utility had filed cases with the PUCN in July and September
of 1999 that sought to recover the costs already incurred by the
utility to serve its customers and to set rates one last time
before they are frozen until 2003 as the deregulation legislation
mandates. The PUCN denied the company's request to recover these
costs and ordered additional cuts to the company's rates. The two
utilities said they have also filed a complaint in state court to
appeal the PUCN decisions regarding their cases.
The companies expect to have decisions on both cases by the end
of the year. The PUCN would not comment on the case. A spokesperson
for the commission said it has not filed a answer to the lawsuit.
It has 20 days from the March 28 filing to do so.
Sierra Pacific shareholders have lost 50% of the value of their
investment over the past eight months, a significant portion of
which is attributed to recent PUCN decisions, Sierra Pacific said.
Since July 1999, the company's stock price has fallen from about
$25 to $12. In addition, the company will take a $24 million hit
against 1999 earnings. "This billion dollar reduction in market
value of the company has tremendous negative consequences for all
Nevadans, not just for those who work for the company or own
stock," added Niggli.
According to Kathleen Drakulich, associate general counsel for
Sierra Pacific and Nevada Power Co., the rejection of these cases
demonstrates a real problem with the legislation. "Under the law,
we were authorized to submit deferred energy cases in order to
recover certain costs. Yet, the PUCN had a different interpretation
of the law, and rejected our claims. As a result, our stock price
has plunged and, in order to come up with the money, our service
has been put under serious strain."
Sierra Pacific made it clear that it is not against deregulation
as a whole. "Nevada Power was an active participant in the process
to open the state's electric markets to competition. We always
believed that if it were handled correctly, customers would benefit
from competition, the legitimate rights of shareholders would be
protected, employees would not be harmed, and the economic health
of the state would not be jeopardized."
The start date for retail access in the state was supposed to be
March 1. Governor Kenny Guinn put off the start earlier this month
citing issues that need clarification such as PUCN cases on
unbundling, stranded cost recovery and rate freezes. He has not
replaced it with a new date. So far, 10 marketers have applied for
a license to operate in the state.