Alleging the law that created the framework for a deregulatedelectric market in Nevada will be detrimental and unfair to theirstockholders and their customers, Nevada Power and Sierra PacificPower filed in federal court last week to have the law declaredunconstitutional.

“Restructuring in the state of Nevada is a very complex issue,”said Michael R. Niggli, CEO Sierra Pacific Resources. “From thebeginning we have supported competition in our industry, but wewant to make sure it is done right. Competition should benefit allcustomers, both large and small, provide a level playing field forall 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 ofNevada (PUCN) decisions, issued over the past two months, that wentagainst Nevada Power in its attempt to recover fuel and purchasedpower costs through its rates.

The utility had filed cases with the PUCN in July and Septemberof 1999 that sought to recover the costs already incurred by theutility to serve its customers and to set rates one last timebefore they are frozen until 2003 as the deregulation legislationmandates. The PUCN denied the company’s request to recover thesecosts and ordered additional cuts to the company’s rates. The twoutilities said they have also filed a complaint in state court toappeal the PUCN decisions regarding their cases.

The companies expect to have decisions on both cases by the endof the year. The PUCN would not comment on the case. A spokespersonfor 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 theirinvestment over the past eight months, a significant portion ofwhich 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 hitagainst 1999 earnings. “This billion dollar reduction in marketvalue of the company has tremendous negative consequences for allNevadans, not just for those who work for the company or ownstock,” added Niggli.

According to Kathleen Drakulich, associate general counsel forSierra Pacific and Nevada Power Co., the rejection of these casesdemonstrates a real problem with the legislation. “Under the law,we were authorized to submit deferred energy cases in order torecover certain costs. Yet, the PUCN had a different interpretationof the law, and rejected our claims. As a result, our stock pricehas plunged and, in order to come up with the money, our servicehas been put under serious strain.”

Sierra Pacific made it clear that it is not against deregulationas a whole. “Nevada Power was an active participant in the processto open the state’s electric markets to competition. We alwaysbelieved that if it were handled correctly, customers would benefitfrom competition, the legitimate rights of shareholders would beprotected, employees would not be harmed, and the economic healthof the state would not be jeopardized.”

The start date for retail access in the state was supposed to beMarch 1. Governor Kenny Guinn put off the start earlier this monthciting issues that need clarification such as PUCN cases onunbundling, stranded cost recovery and rate freezes. He has notreplaced it with a new date. So far, 10 marketers have applied fora license to operate in the state.

John Norris

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