While the future of Nevada's multi-billion-dollar Ely coal-fired generation and transmission line project remains uncertain, Sierra Pacific Resources' two utilities are pursuing a three-part strategy to develop alternatives -- more energy efficiency, renewables and traditional natural gas-fired generation. Current capital expenditure plans do not anticipate Ely construction starting during the next three years.

Sierra CEO Michael Yackira made these points during an earnings conference call Feb. 11 in which the holding company for Sierra Pacific Power Co. and Nevada Power Co. reported decreased year-over-year and fourth quarter-over-fourth quarter earnings because of a $116 million nonrecurring item from 2006 that restored previously disallowed purchased power costs by the utilities. On a recurring basis, earnings for 2007 were $197.7 million, or 89 cents/share, compared with adjusted net income of $120.3 million, or 58 cents/share, in 2006.

Responding to repeated questions on the $3.7 billion Ely project calling for up to four coal-based generation plants and a major new high-voltage north-south transmission line linking the two Nevada power utilities, Yackira refused to categorize the project as "dead" even though its timing has been pushed back indefinitely and he reiterated that the transmission line at this point would not be pursued separately.

"The Ely Energy Center and the transmission line are tied together in terms of the permitting process," Yackira said. "They will go forward in that way, and we certainly think the transmission line is important for the Ely Center and for tying the two utility systems together to allow better sharing of resources, and more importantly, in allowing for renewable energy development in the northern and eastern portions of the state."

In the meantime, the Nevada utilities move ahead with other options, such as the 541 MW Tracy combined-cycle natural gas-fired generation plant in northern Nevada that is scheduled to start operations before this summer, making Sierra's northern Nevada utility operations "virtually energy self-sufficient," Yackira said. And in the south, the first 400 MW of new peaking units at the Clark Generating Station will start by June this year, he said.

Yackira reiterated that the original plan to have the first 750 MW phase of the Ely coal-fired project operational in 2011 is no longer feasible, and thus the utilities announced last year that a 500 MW natural gas-fired plant at Nevada Power's 144 MW Harry Allen generation site north of Las Vegas will be pursued earlier than had previously been planned.

"We had expected to expand the generating capacity at the Harry Allen plant after the Ely Energy Center was completed, but because we found the Ely project was going to be delayed, we decided it was in the best interests of our customers to accelerate the construction schedule at the Harry Allen site," he said.

At times during the call, Yackira had to correct questioners who perceived the Ely project may be "dead," and that natural gas compared to coal is becoming more economic as a generation source. Ely is "certainly not dead," he said, and volatility of wholesale natural gas prices is what the Nevada utilities are trying to eliminate by diversifying into more new coal and away from their current large dependence on natural gas-fired generation.

The only certainty regarding Ely right now, Yackira confirmed, is that it cannot come on-line by 2012 as was previously planned. "The whole issue right now is timing and reliability," he said. "It is difficult to pinpoint [a new timetable for Ely] because we don't know when the final decisions by the [federal] Bureau of Land Management allowing access to the site will happen.

"It is impossible to tell at this point when we can start construction, let alone complete it."

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