Sierra Pacific asking permission to pass $22 million debt to ratepayers

The Public Utilities Commission finished three days of hearings Wednesday into whether customers should pay Sierra Pacific Power Co.'s $22.5 million settlement to ENRON or if the utility should just absorb the loss.

The PUC is expected to take a month or more to render a decision.

Sierra Pacific filed for a rate increase to cover the remaining debt owed the now-bankrupt ENRON saying it is a business cost rightfully passed on to consumers.

Nevada's Bureau of Consumer Protection filed to block the utility's application, arguing Sierra Pacific violated its own power purchasing plan during the western utility crisis of 2001. During that period, electric power prices doubled and tripled in some cases and major cities in the West suffered rolling blackouts as utilities struggled to provide service.

Consultant Richard La Capra, of Boston, said ignoring its own purchasing strategies, Sierra Pacific purchased too much power and did so just before the price of electric power began to come down again. He said the utility ignored indicators and measures taken by the Federal Energy Regulatory Commission that should have told them to wait.

He said the company has a plan on how to manage its purchasing of power that would have prevented this situation, but failed to follow it.

"They bought too much, too soon and at too high a price," he testified before the PUC on Wednesday.

La Capra recommended the utility be denied the right to pass that cost along to power customers, saying it was the company's error and Sierra Pacific should cover the $22,520,916 it owes ENRON for the power contracts in question.

He was joined by Daniel Peaco, president of La Capra Associates, who pointed out the debt involves power that was never delivered to the state because the contracts were canceled.

Utility officials argued the purchases were reasonable and prudent at the time and that the $22.5 million is a legitimate cost of business which ratepayers should cover. They also argued the issue of whether those contracts were prudent was resolved in the 2004 rate case involving the ENRON settlement and can't be raised now.

Their rate case asks the PUC for an increase in electric charges to cover the debt.

The Consumer Advocate's argument was joined by Newmont Mines, Sierra Pacific's biggest single customer.

But utility officials were joined by the PUC staff, which also described the rate hike as the proper way to pay the debt.

Testimony presented by staff economist Ron Knecht described those costs as "justly, reasonably and prudently incurred by SPPC."

This is the final issue in what was originally a demand for $300 million by ENRON for terminated contracts with Sierra Pacific and Nevada Power, both divisions of Sierra Pacific Resources. The primary dispute was settled in a deal that limited Sierra Pacific's potential liability to some $89 million.

Sierra Pacific's share of that total was set at $37 million but, in 2004, the PUC ruled Sierra Pacific could not pass along $45 million of that debt to customers.

That rate case, however, involved only the contracts where power was delivered. The $22.5 million involves contracts which never activated and where no power was delivered to Nevada consumers.

The PUC took the case under submission.

• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.