News Releases

Sierra Pacific Resources Calls Price Caps Unfair to Nevada Consumers; Joins Other Western Utilities to Change Federal Price Caps

Aug 7, 2001

Sierra Pacific Resources (NYSE: SRP) has joined with major electric utilities in Washington and Oregon to seek changes in recently imposed price caps on wholesale power that the company says are unfair to consumers in Nevada. Other participants in the effort include Puget Sound Energy in Washington and Oregon's Portland General Electric.

The price caps were ordered by the Federal Energy Regulatory Commission (FERC) in June to limit escalating prices for daily purchases and sales of spot power in California, but the controls also apply to all western states, including Nevada. The price caps set a daily price for power that is bought and sold daily in the west, but were not applied to longer-term power contracts, which are normally lower in price, especially when power supplies are limited. Additionally, western utilities are being required to provide power to California at less than full cost under the price controls, thereby leaving customers in the other western states to finance the California relief effort.

"While it is appealing to think that price caps limit the cost of wholesale power to consumers, these controls unintentionally but dramatically shift the burden of California's poor planning to other states, like Nevada, that have planned properly for the future," said Walt Higgins, chairman, president and chief executive officer of Sierra Pacific Resources. "Now, Californians can obtain power at the last minute at an artificially low price while states that have had the foresight to purchase more secure, longer-term power are left with higher bills."

Higgins said the price caps actually harm reliability because other utilities and independent power producers are less likely to take the risk of selling power at the last minute at the federally mandated low price. The inability to secure spot power as usual was a major factor in the brief power interruption affecting 10,000 customers last month in Las Vegas.

Matching the concerns raised by Nevada Power, the group of western utilities also criticized FERC for first encouraging energy providers to move quickly away from reliance on the short-term wholesale electric market and then, through their price control mechanism punishing those utilities that followed the directives.

The western group is proposing changes to the FERC price controls that will also protect customers outside of California from unreasonable wholesale electric costs while at the same time ensuring a secure supply of energy into the future.

Higgins said he is confident that other western utilities that share the concerns expressed by the western group will join the effort to change the price control policy.

"We recognize that the FERC was seeking to do the right thing in its initial order," said Higgins. "However, now that everyone has had a chance to see the real impact of these price controls on everyone, especially consumers outside of California, it is time for a more lasting solution that rewards consumers and states for good planning."


SOURCE: Sierra Pacific Resources

Contact: media, Karl Walquist of Sierra Pacific Resources,