Sierra Pacific reports 177% earnings decline on purchased power costs
Reflecting growing unrecovered losses on purchased power, Sierra Pacific Resources, Reno, Nev., reported a $39.8 million loss for 2000, a 177% earnings decline from 1999. Mark Ruelle, senior vice-president of Sierra Pacific, attributed the losses to nearly $889 million of unanticipated fuel costs for the year. Wholesale costs were up by 115% and 130% for Nevada Power Co. and Sierra Pacific Power, respectively, Sierra Pacific's utility subsidiaries, the company reported.
By the OGJ Online Staff
HOUSTON, Feb. 20�Reflecting growing unrecovered losses on purchased power, Sierra Pacific Resources, Reno, Nev., reported a $39.8 million loss for 2000, a 177% earnings decline from 1999.
Wholesale costs were up by 115% and 130% for Nevada Power Co. and Sierra Pacific Power, respectively, Sierra Pacific's utility subsidiaries, the company reported. The company reported a net loss of $18.2 million or 23�/share for the quarter ended Dec. 31, 2000. For year-end 2000, the company reported a net loss of $39.8 million or 51�/share -- a 177% drop from 1999.
Mark Ruelle, senior vice-president of Sierra Pacific, attributed the losses to nearly $258 million of unanticipated fuel and purchased power cost for the quarter and $889 million for the year. Quarterly operating expenses amounted to $571 million, up 69% from the same quarter in 1999 before adjusting for the deferred energy write-off incurred in 1999.
Operating expenses for the year were $2.2 billion, up 107% from the prior year before the 1999 write-off. "This loss is clear evidence that this problem is real and growing,'' Ruelle said. He said the company has reduced regular operational expenses by nearly 10% as a result of the merger of Nevada Power and Sierra Pacific Resources, but the savings are dwarfed by the soaring cost of fuel and power
Without rate relief, the cost of fuel and power is close to crippling Sierra Pacific's ability to serve the needs of customers, Ruelle said. Earlier in the year, the company negotiated a global agreement among the utilities, regulators, and other parties that granted a net $48 million rate increase to Nevada Power in order to recover increased fuel and purchased power costs. The agreement also allows monthly rate adjustments to reflect changes in fuel and purchased power costs for both Nevada Power and Sierra Pacific Power Company.
However, Ruelle said the agreement took effect in July before the most recent surge in wholesale fuel and power costs. To date, Nevada Power has filed for and state regulators have approved an additional $85.5 million of monthly fuel and purchased power annual rate increases and Sierra Pacific Power Company has filed for and the the Public Utility Commission of Nevada (PUC) has approved $48.9 million in annual rate increases.
Although both utilities are increasing electric rates to recover higher fuel and purchased power costs, Ruelle said the mechanism for adjusting rates is insufficient because it lags changes in actual energy costs and is capped. Without further rate increases, he said, high fuel and purchased power costs are likely to continue affecting earnings negatively until the comprehensive energy plan is implemented or energy costs decline.