Nevada, Sierra lobby for power merger

Officials with Nevada Power Co. and Sierra Pacific Resources say their "Silver State deal" to merge would make it more difficult for a California company to take them over and turn them into a distant subsidiary.

Addressing an editorial board meeting of the Las Vegas Sun on Tuesday, Michael Niggli, president and chief operating officer of Nevada Power, and Malyn Malquist, chairman, president and chief executive officer of Sierra Pacific, said most of the feedback they've received about the proposed $2.3 billion merger has been positive.

Charles Lenzie, who will retire as chairman and chief executive officer of Nevada Power when the merger is complete, said he expected "a tough meeting" when shareholders were apprised of the proposal earlier this month. While some shareholders said they weren't happy with the plan to reduce the company's quarterly stock dividend from $1.60 to $1 per share, Niggli said a majority embraced the merger proposal as in the best interests of customers and shareholders.

"Everybody invests for different reasons," Niggli said. "It'll be a growth stock now instead of a dividend stock."

Nevada Power and Sierra Pacific are on the verge of filing their plans to merge with the Public Utilities Commission after announcing the proposal late last month. PUC Chairwoman Judy Sheldrew and state Consumer Advocate Fred Schmidt have reserved judgment on the merger until they see the formal proposal.

The most recent Nevada Power and Sierra Pacific press packet includes letters of endorsement for the merger from Assembly Majority Leader Richard Perkins and Senate Majority Leader William Raggio. Assembly Speaker Joe Dini, D-Yerington, and Sen. Randolph Townsend, R-Reno, also have come out in favor of the merger, which would create a combined base of 800,000 electric customers, 100,000 gas customers and 65,000 water customers. The gas and water customers presently belong to Sierra Pacific and live in Northern Nevada.

But Niggli said the fastest-growing utility in the nation -- Nevada Power -- and the fourth-fastest-growing utility -- Sierra Pacific -- would represent a situation in which one plus four still equals one. Nevada Power's high growth potential and Sierra Pacific's high cash flow and superior credit rating will make for a strong company, he said.

No layoffs are forecast as a result of the merger. An analysis indicated there are 250 duplicative positions, but there's a turnover rate of about 300 per year between the two companies. As a result, some employees may need to transfer and be retrained. Niggli said jobs would be posted both in Southern and Northern Nevada as they open.

While it could take years, if at all, for the companies to connect their power grids -- the closest their lines come within each other is 250 miles -- it shouldn't take long to link their telecommunications systems. Niggli also said the joined companies would benefit from sharing their best technological knowledge with each other. He cited a trenching program as an example.

In a related matter, Niggli and Lenzie discussed the ongoing movement toward restructuring the utilities industry in the state.

The PUC is in the midst of the rulemaking process to open the industry to competition by Dec. 31, 1999.

Niggli said one of his company's biggest concerns is a proposal that would prevent utilities formerly operating as monopolies from using their names as an electricity provider. Under the proposal, a competing utility would have to form a subsidiary with an unrelated name in order to deliver electricity to customers.

The reason for the name change proposal: Regulators feel companies that operated in a monopoly environment would have an unfair name recognition advantage over newcomers. Niggli pointed out many of Nevada Power's new customers are transplanted Californians who would be more familiar with the names of California-based competitors.

Nevada Power plans to fight the plan when the PUC addresses it, probably later this summer. When California considered the issue when it moved into a competitive environment in March, it rejected a similar name change proposal.

Lenzie also said he was concerned about the prospect of "slamming" in the restructured utility environment. Slamming, the practice of a company switching a customer to a competitor without permission, has been a problem in the competitive telephone industry.

Lenzie is concerned customers not realizing Nevada Power will no longer be the only electricity provider would call them anyway thinking they were responsible for any slamming problems that occur.

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