Sierra Pacific Power Company
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On May 28, 2002, the Nevada Public Utilities Commission (PUCN) made its final decision on Sierra Pacific Power Company's general rate and deferred rate cases. In brief, the commission disallowed a total of $53.1 million from the company's proposed $205 million requested in its deferred case, amortized over three years. The PUCN also ordered an estimated $14 million decrease in the general rate case, as opposed to the $16 million increase requested by the company. These new rates became effective June 1.

This decision, which combines the results of both cases, means an average 3% rate decrease for residential customers and a rate increase for commercial customers ranging from approximately 1-11%. The average overall increase for all classes of customers is approximately 5%.

If you have questions about your Sierra Pacific bill, please call 834-4444.

Question& Answers

Q. What is the impact to customers'bills?
A. As a result of this decision, combining the two cases, the typical Single Family Residential customer will see an approximate 3% decrease in their bills. For the typical Multi-Family Residential customer, living for example in an apartment, the decrease would be approximately 1%. The typical small commercial GS-1 customers will see a 1.6% increase.

Larger commercial and industrial customers will see varying percentage increases, depending upon their size, energy consumption and time of use. For example, the increase for GS-2TOU customers is an average annual 10.58%. However, depending upon their consumption and their time of use, a GS-2TOU customer could see an increase in this summer's bills as high as 15%, while the increase in their winter bills would be in the 7-8% range.

Overall rate changes by customer class

** GS-3 and GS-4 classes are large commercial customers. Inquiries should be directed to Major Account at 775-834-5771.

Q. What's different about the new Single Family Residential and Multi-Family Residential rates?
A. A new customer rate class became effective June 1, when residential service was broken into two classes -- Residential Single Family (D-1), for a stand-alone home; and Residential Multi- Family (DM-1), for an apartment, or other residence housing more than one tenant. The $3 customer charge remains the same for both residential customer classes, while the energy consumption (per kWh) charge is slightly lower for the Multi-Family Residential customers. The deferred energy charge is the same for both residential classes of customers.

Q. Have the Tiered Rates been eliminated?
A. Yes. The PUCN agreed with the company's proposal and eliminated the complicated"tiered rates"for residential and GS-1 customers that have been in effect since March 2001. Instead, these customers will be charged a level rate for their energy consumption, based upon their kilowatt hour usage; plus a deferred energy rate applied to each kilowatt hour consumed. The $3 customer charge remains the same. Customers will receive a bill insert explaining the transition in detail.

Q. How will the shift from the tiered rates to no tiers be shown on my bill?
A. As a result of dropping the tiers, Sierra Pacific customers will begin seeing a"transition bill"in June. This transition bill will include tiered rates for power used up to and through May 31. Beginning June 1 forward, the tiers will be replaced with the levelized per kWh energy consumption charge and the deferred energy charge. Customers will see these"hybrid"bills until the transition to the new rate is complete.

Q. What is this new Facilities Charge for medium and large commercial classes of customers?
A. This is not a new or additional charge to these classes of customers, rather it is a different way of collecting for charges that were previously included in the time of use demand and energy charges. The Facilities Charge was added to break out the distribution costs in the medium and large commercial classes (GS-2, OGS-2. GS-2TOU, GS- 3) as a separate line item. The new Facilities Charge on a customer's bill, means that customers Time of Use (TOU) demand and energy charges are no longer recovering these costs. As a result of the break-out of the facilities component, a similar amount has been deducted from the customer's TOU demand and energy charges.

Q. What are the reasons for breaking out the distribution cost into a Facilities Charge?
A. With the passage of Assembly Bill 661 in 2001, the Nevada Legislature allowed for retail open access for large customers to purchase power from an alternative seller. In other words, customers using one megawatt or more energy can leave Sierra Pacific Power's or Nevada Power's systems, with permission of the Public Utilities Commission of Nevada, and purchase their energy from an alternative seller. However, SPP or NPC would continue to provide the distribution services necessary to move the energy from the alternative seller to the customer. Therefore, for customers choosing to purchase power elsewhere, the Facilities Charge represents the amount the departing customer continues to pay to the utility in order to cover their share of the costs to get the power to them. Of course, the customer would then pay the alternative seller for any amount of energy they purchased from them.

Q. Why did Sierra file these cases in the first place?
A. Sierra Pacific's filings of both the General Rate Case and the Deferred Energy Case was in response to legislation passed by the Nevada Legislature in 2001 (Assembly Bill 369) that allowed utilities to re-establish the use of deferred energy accounting - a mechanism that permits the company to recover the costs of fuel and power purchased by the company that were not already covered in current rates. (It works the same way if fuel and purchased power costs are lower than current rates, and results in a decrease in rates to customers.) This legislation also specified when and what kind of rate cases the company would file torecover costs. Sierra Pacific Power last filed for a change in its general rates in 1994.

Q. What's the difference between the General Rate Case and the Deferred Energy Case?

Deferred Energy Case
A. In the Deferred Energy Case, Sierra Pacific Power requested reimbursement for costs already paid to purchase fuel and power on behalf of our customers during the 2000-2001 energy crisis. All wholesale fuel and purchased power costs are passed on to customers dollar-for-dollar, with no mark-up by the company.

The approximate $150 million increase granted by the PUCN will be amortized over three years, meaning that Sierra Pacific will collect approximately $50 million annually from its customers to recover fuel and purchased power costs over the next three years.

General Rate Case
A. The General Rate Case examined expenses Sierra Pacific directly controls, such as wires, poles and trucks, the costs the company pays to borrow money to operate and the profit it pays to the owners of the company.

The $14 million decrease the PUCN ordered in Sierra's general rate case was mainly attributable to three things: 1) the reduction in the company's Return on Equity, or the amount we pay our shareholders; 2) the delay of the company's request to recover merger costs which resulted from the merger of Sierra Pacific and Nevada Power Company; 3) the delay of the company's request to recover money the company spent in an attempt to sell its power plants, until the sale was ultimately halted by the legislature. While the delay of items number two and three contributed to the decrease in the general rate case, the company can re-file with the PUCN to recover these costs at a later date.