Thursday, August 07, 2003
Copyright © Las Vegas Mercury

Willing buyer

Nevada Power takeover is lost in a back eddy

By Larry Wills

As Nevadans cope with nasty surprises in their summer electric bills, they may be wondering what ever happened to the much-heralded Nevada Power takeover.

Well, it's still on the burner at the Southern Nevada Water Authority, which wants to buy the utility and make it a publicly owned operation. The question is whether that's the front or the back burner. In recent weeks, water authority officials have been consumed with water conservation issues amid a lingering drought.

"We don't have a time frame on it," J.C. Davis, water authority spokesman, says of the takeover. "We're waiting for a resolution on several issues."

In other words, don't hold your breath. After all, it's been only nine months since 57 percent of Clark County voters endorsed the buyout. The good news is the state Legislature this year did not put up any legal roadblocks for the water authority, as conservatives had promised to do. And a state law prohibiting hostile takeovers of utilities expired July 1.

Assemblyman David Parks, D-Las Vegas, managed to push a bill through the Legislature requiring the authority to make up for $75 million in tax revenues lost to local governments. But that was already factored into the original $3.1 billion offer for Nevada Power.

The bad news is Nevada Power is ignoring the authority's overtures. The authority sent two letters indicating its intent to buy the utility. The first was rejected, the second ignored. "The offer is still on the table," Davis says. "We haven't heard back from them."

"The company has always said we were not for sale," counters Sonya Headen, Nevada Power spokeswoman.

So, it's business as usual at the utility. "We're building more transmission lines," Headen says.

Tim Hay, the attorney general's consumer advocate, believes something else may be afoot. "There's a lot of street talk out there about selling part of the distribution and transmission systems," he says. He wonders if another utility may be waiting in the wings. "I'd be surprised if any investor-owned utility would result in ratepayer savings."

That's been the issue since last year after Nevada Power tried to strap customers with a $922 million rate hike to pay for losses during the 2001 power shortage. The state Public Utilities Commission awarded the company about half that figure.

Critics of the company's predicament saw financial incompetence in purchasing wholesale power at artificially inflated prices, outlays that could not be recovered under current rate levels.

The issue landed on the November ballot. Despite one-sided lobbying against the buyout--Nevada Power spent $3 million in advertising, while the other side spent nothing--more than half of voters backed the idea.

Hay has insisted that a publicly owned utility, even with the additional money needed to pay off debts, local taxes and shareholders, would give ratepayers a 20 percent break on their bills. Now, Hay says, Nevada Power is limping along buying bonds at three times the normal interest rate, thanks to a weak market rating.

"A resource plan is talking about trying to build another generating facility," he says. "That's unrealistic concerning their current financial condition."

Davis insists that any change in the utility's assets would alter the authority's offer. "The original offer for assets and the existing debt has always been subject to modification, pending a closer evaluation of the resources," he says. "If they sold a bunch of their capital, and ultimately an agreement were made, that agreement would reflect that amount."

Headen says she isn't aware of any plans to sell company assets.

In the meantime, Davis wouldn't comment on any long-range plans or if there's a limit to the patience of authority officials. "We didn't put a deadline out on this," he says.