Although Nevada utilities took in stride all-time record peakelectric demand last week, drawing on a diverse supply portfoliothat includes about one-third purchased power deals under long-termfixed-prices, the major energy holding company, Sierra PacificResources, reported a $20.2 million net loss for the second quarterended June 30. The red ink was attributed to $70 million ofunanticipated fuel and purchased power price increases that werereported by the company last month.

“Like other utilities in the West, Nevada Power Co. has beenconfronted with an unprecedented and extremely volatile energymarket over the past several months,” Sierra Pacific Resources saidin a prepared statement in July. “That has caused the company topay significantly more for fuel and purchased power.”

Sierra recently completed a merger that gives it control of bothNevada Power in the south and Sierra Pacific Power in the north ofthe state, both of which individually in last year’s second quarterreported net profits of $11.7 million and $14.8 million,respectively. For the recent Western heat wave and power crunchboth reported no supply or price problems last week. May-June pricespikes, however, took their toll despite the two utilities’fixed-price deals.

Sierra Pacific Resources has a pending $2.1 billion purchase ofPortland General Electric from Enron. This promises to greatlyexpand its operations in the Pacific Northwest.

Both Nevada Power and Sierra Pacific set all-time peak-demandrecords. Sierra hit 1,577 MW in the northern half of the state July31; Nevada Power hit 4,325 MW the next day (Aug. 1), and issuedcurtailment alerts that forced hotel/gaming casinos to cut outnonessential power usage, according to a Reno-based Sierra PacificResources spokesperson, Karl Walquist.

“We got hit hard in May and June with early very hottemperatures that caused us to have to rely more heavily than weexpected on the spot market,” said Walquist, noting the unexpectedfuel and purchased power costs will impact earnings for the rest ofthe year.

For the rest of the summer, however, he said Sierra PacificResources’ two utilities “have sufficient supplies due to long-termcontracts that were negotiated last fall.” Sierra’s Nevada Powersubsidiary felt the price and supply crunch earlier in the summerfrom May to the end of June, Walquist said.

The utilities have been locked in a fight with Nevada regulatorsthat was just recently settled, paving the way for a phasedelectric industry restructuring in the state to begin later thisyear. The two utilities reported increases in operating revenuesfor the first half of the year of 13.1% for Nevada and 10.4% forSierra Pacific, compared to the same period in 1999. The revenuegains amidst the net earnings loss were attributed mainly tocontinued customer growth (6-7% annually in the south and 3-4% inthe north) and warmer-than-normal weather in southern Nevada.

In July, the state public utilities commission approved asettlement among the utilities, regulators and other parties thatgranted Nevada Power a $48 million rate increase to recover some ofthe increased fuel and purchased power costs. The agreement alsoallows monthly rate adjustments to reflect changes in those costsfor both Nevada utilities in future months.

Nevada Power has not collected any of the added funds yet, andhas only filed recently to collect $15 million effective Sept. 1.

“Despite the rate increase, electricity prices in southernNevada remain significantly lower than in other areas of thePacific Southwest,” according to Sierra Pacific Resourcesofficials, who note that Nevada’s power prices are 30% lower thanmajor cities in Arizona and 50% lower than in major cities inCalifornia.

Nevada restructuring now is scheduled to begin Nov. 1 for thelargest electricity customers — large resorts, mines and theSouthern Nevada Water Authority. April 1, 2001 brings onmedium-commercial customers; June 1, 2001 will mark inclusion ofsmall commercial customers. Residential customers will be phased inover the Sept. 1-Dec. 1, 2001 period.

In July, the Nevada companies filed their open access tariffswith FERC.

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