News Releases

State's Utilities File to Declare Deregulation Unconstitutional

Mar 27, 2000

March 28, 2000
Sierra Pacific Resources
Contact: Faye I. Andersen/ Karl Walquist
Phone: 775-834-4822/775-834-3891/702-367-5680

For Immediate Release

Nevada Power and Sierra Pacific Power companies filed today in federal court to have the Nevada law which created the framework for a deregulated and competitive electric market in Nevada declared unconstitutional. The companies stated the law will be detrimental to some customers while giving unfair advantages to others, based on regulatory decisions implementing the law, and extremely harmful to the company shareholders.

The companies also stated their intention to file a complaint in state court to appeal the Public Utilities Commission of Nevada's (PUCN) decisions regarding their July and September deferred energy cases.

In accordance with state restructuring law, Nevada Power Co. had filed cases with the PUCN in July and September of 1999 which sought to recover fuel and purchased power costs already incurred by the utility to serve its customers and to set rates one last time before they are frozen until 2003. In decisions issued in February and March, 2000, the PUCN denied the company's request to recover these costs and ordered additional cuts to the company's rates.

Nevada Power Co. is a wholly-owned subsidiary of Sierra Pacific Resources, which is also the parent company of Sierra Pacific Power Co.

"Restructuring in the State of Nevada is a very complex issue," said Michael R. Niggli, Chairman and CEO of Sierra Pacific Resources."From the beginning we have supported competition in our industry, but we want to make sure it is done right. Competition should benefit all customers, both large and small, provide a level playing field for all competitors, and not harm company shareholders."

According to Niggli,"In 1997, the Nevada Legislature began the difficult challenge of creating a framework to introduce competition into Nevada's electric markets. The first bill, passed in 1997, was revisited in 1999. Nevada Power was an active participant in the process to open the state's electric markets to competition. We always believed that if it were handled correctly, customers would benefit from competition, the legitimate rights of shareholders would be protected, employees would not be harmed, and the economic health of the state would not be jeopardized."

Niggli added that Nevada Power is not the engine of growth for Southern Nevada, nor is Sierra Pacific the engine of growth for Northern Nevada."However, both provide a backbone of infrastructure and services that are vital to prosperous growth in the areas they serve. It is critical the transition to a competitive electricity industry occurs in a manner that ensures these infrastructure and service needs will continue to be met in the future.

"Clearly, none of these problems were anticipated when competition was first envisioned for Nevada," he said.

"We think the time has come to step back and restore the foundation and balance that underlies the promise and benefits of healthy and fair competition. These benefits can only be realized if electric competition is done the right way, to offer benefits to all stakeholders and provide a level playing field for all competitors.

"Besides the complexities, we now know the consequences of doing deregulation the wrong way," Niggli said. Company shareholders have lost 50 percent of the value of their investment over the past eight months, a significant portion of which is attributed to recent PUCN decisions."This billion dollar reduction in market value of the company has tremendous negative consequences for all Nevadans, not just for those who work for the company or own stock," he continued.

Following the release of the draft order on March 21, 2000, relating to Nevada Power's Deferred Energy filing, the indication was that the company would take a reserve of about $20 million against earnings in the first quarter 2000. Upon receipt of the final decision and discussion with the company's external auditors, the reserve will be $24 million against 1999 earnings, as financial statements for 1999 have not yet been filed with the Securities and Exchange Commission.