Sierra Pacific to file to recover $525-$900 million
With electric deregulation all but rescinded in Nevada, utility subsidiaries of Sierra Pacific Resources will file both general rate cases and to recover unreimbursed power costs totaling $525-$900 million this year and next, company officials said Thursday. The deferred cost recovery can be spread out over 3 years to avoid 'rate shock,' they said.
By the OGJ Online Staff
HOUSTON, June 7 -- With electric deregulation all but rescinded in Nevada, utility subsidiaries of Sierra Pacific Resources will file both general rate cases and to recover unreimbursed power costs totaling $525-$900 million this year and next, company officials said Thursday.
"This is not an ambiguous recovery," said Mark Ruelle, president of Nevada Power Co. and acting chief financial officer of Sierra Pacific, its parent, during a conference call. Under a bill just passed by the Nevada legislature, the company becomes a "plain old integrated regulated utility," he said, earning a regulated rate of return.
A companion bill will permit customers with a load of more than one megawatt to continuing choosing suppliers. Buyers would have to demonstrate selecting a supplier other than a utility wouldn't damage other retail customers.
The emergency legislation prompted by the power crisis in California gave the utility the right to recover fuel and purchased power costs accumulated over a 12-month period from consumers, while expenses in excess of collections would accumulate in a deferred balancing account.
Nevada Power Co. will have between $450-$750 million built up in the deferred balancing account by year end and Sierra Pacific Power Co. will have $75-$150 million, said Richard Atkinson, Sierra Pacific Resources treasurer. The deferred cost recovery can be spread out over 3 years to avoid "rate shock," Ruelle said.
Atkinson termed the ability to pass on its unreimbursed costs for wholesale power "critical" to restoring the company to good financial health and eventually to reinstating the dividend which was eliminated as part of a cost cutting program last year.
Meanwhile, he said, the company is "delighted" with the financial community's reception to financing its receivables. Initially, he said, "We had to go out and explain why our governor is not [California] Gov. Gray Davis," who opposed retail rate hikes for months. Unreimbursed commodity costs drove Pacific Gas & Electric Co., San Francisco, into bankruptcy protection, while Southern California Edison Co., Rosemead, Calif., is awaiting a state bailout.
With wholesale power costs falling in the past month, Ruelle said, the base rate set by state regulators could be set lower which would mean recovery of the deferred cost would take place over a shorter period.