As two of its largest Las Vegas Strip casino/hotel customers seek their own electricity supplies, Sierra Pacific Resources’ Nevada Power Co. last week paid off about $100 million in delayed wholesale power bills to 10 suppliers that didn’t terminate agreements with the southern Nevada utility. Terminated agreements are still unsettled with at least two suppliers reportedly seeking more than $60 million in contract cancellation charges.

Meanwhile, the Riviera and Imperial Palace hotel/casinos joined a growing list of gambling operators who have notified state regulators that they are pursuing their own power supply deals, collectively totaling about 20 MW, with merchant energy providers — in this case with Reliant Resources. Under the state’s procedure in which the state’s largest electricity users can sign direct-access contracts if they can prove their leaving the utility system will not add costs to remaining customers, both hotel/casinos have a month to formally file applications to leave Nevada Power’s system.

The suppliers that Nevada Power paid off include Duke and Williams but did not include the suppliers who terminated contracts, which are El Paso Merchant Energy, which is asking for a $36 million cancellation payment from the utility, and Morgan Stanley Capital Group, which seeks a $25 million termination fee. Nevada Power disputed El Paso’s calculated amount, but not that of Morgan Stanley, according to an earlier Securities and Exchange Commission filing.

In its continuing efforts to build cash and shore up its balance sheet, Nevada Power Wednesday also announced that it closed a $250 million general and refunding mortgage notes financing transaction that was priced last week, and $200 million of those proceeds will be used to pay maturing bank debt. It also announced the closing of up to $125 million in an accounts receivables purchase facility as a back-up liquidity facility.

Since the western wholesale power price spikes of 2000-2001, Sierra Pacific and its two utilities have struggled financially to recover, but Nevada Power has experienced the toughest time due to a Nevada Public Utilities Commission decision last March that granted it only about half of a three-year, $900 million rate increase request to pay off its wholesale power debts. In this interim period of uncertainty, a local water district has made a $3.2 billion bid to buy the utility and make a public sector, nonprofit entity out of it, and the local Clark County elected officials put a nonbinding referendum on the upcoming ballot, asking voters to express whether or not they favor a public sector utility over Nevada Power.

In this extremely challenging environment, with its credit rating lowered, Nevada Power’s ability to pay off the extended power bills with existing cash balances is a major milestone, and one it is hoping will further steer voters to reject the ballot measure.

Nevertheless, the latest local news reports indicated earlier that another half-dozen of the state’s largest electric users are likely to follow the Riviera and Imperial Palace moves to direct access contracts, assuming they can get Nevada PUC approval. A multi-company Nevada Energy Buyers Network already has been established to represent the largest customers in Nevada Power’s territory in the southern half of the state. In the north, one firm that failed earlier in its bid to exit Sierra Pacific Power has filed a new letter of intent with state regulators.

A buyers’ network source was quoted by the Las Vegas Review-Journal as indicating the Riviera and Imperial Palace deals with Reliant could start by next June, and are expected to be three- to five-year contracts.

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