Thursday, May 15, 2003 | 11:13 a.m.
Southern Nevada ratepayers could be asked to pick up the tab for higher interest charges Nevada Power Co. is paying since having its credit rating cut following a $437 million rate disallowance the company wrote off last year.
Walter Higgins, president and CEO of Nevada Power's parent company Sierra Pacific Resources, told Wall Street analysts this morning that those additional expenses will be included in a general rate case to be filed with the state Public Utilities Commission later this year.
"Interest costs will be addressed in a general rate case this year," he said.
Those costs were blamed for contributing to a $16.5 million first-quarter loss the company announced this month. Nevada Power is paying 10.88 percent on a $250 million debt offering issued in December. Sierra Pacific saw its interest expenses increase from $58.8 million in the first quarter of 2002 to $68.6 million in the same 2003 quarter.
Nevada Consumer Advocate Tim Hay said the debt structure would be included in the general rate case, but increased interest charges incurred because of disallowances based on imprudent practices would be challenged.
"Otherwise, it's a backdoor way of recovering for imprudence," he said.
Other costs to be addressed in the general rate case, which is expected to be filed in October, will include maintenance and operations expenses and taxes.
Higgins and Sierra Pacific Chief Financial Officer Richard Atkinson also told analysts that there is little chance that Sierra Pacific would be able to buy back stock in the near future.
"This is now a company which does not, because of the current credit situation, enjoy normal access to the capital and credit market," Higgins said, adding that the company will not spend cash to buy back shares.
"We do not believe at this time there is any financially intelligent way to do something like buy stock back."
Sierra Pacific also announced that it has filed a motion for reconsideration of a recent district court decision to throw out Nevada Power's appeal of last year's $437 million PUC disallowance.
In the filing, Nevada Power cites Carson City District Court Judge Bill Maddox's failure to throw out disallowances related to a controversial contract Nevada Power never executed with Merrill Lynch. The PUC originally disallowed $180 million related to the failed deal.
The filing cites testimony from PUC staff in this year's case that discredits the Merrill Lynch deal.
"We believe the judge made some mistakes in his conclusion," Higgins said.
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