Exhibit 99.1
LAS VEGAS, NV (January 29) Sierra Pacific Resources issued a warning that Nevada
must take rapid and dramatic action to avoid being "engulfed by the financial
and operational chaos" of the California energy market, Sierra Pacific
Resources (NYSE: SRP - news) Chairman and CEO Walt Higgins today outlined an
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emergency package of proposed long-term contracts, tiered price increases, low
income assistance and conservation programs to stabilize the energy markets in
the state.
In the plan filed today with the Public Utilities Commission of Nevada (PUCN),
Sierra Pacific's Nevada Power and Sierra Pacific Power utility subsidiaries are
proposing short-term emergency price increases ranging from zero for certain
low-usage customers to as much as 29 percent for the state's largest energy
users to correct serious imbalances between the cost of wholesale power and
retail prices. The average increase is 17 percent.
The same imbalance bringing the near collapse of the California power system is
sweeping the Western U.S. and prompting nearly every other utility to take
similar measures to assure reliable utility service.
"Nevada, despite a good energy policy, is not immune from what is happening in
California," said Higgins at a news conference today in Las Vegas. "This
situation is unprecedented, unanticipated and potentially disastrous for
Nevadans if we do not exercise the leadership it takes now to correct these
imbalances in supply and demand and between cost and price. No business can
continue selling a product for less than it costs them to buy it on the
wholesale market.
"We know any rate increase is painful, but there is no escaping the fact that
the consequences of inaction are much more severe to the residents and
businesses of this state, as California clearly shows. Nevadans simply cannot
let the lights go out with the kind of irresponsible inaction we've witnessed
over the hill. Even with this increase, our rates will still be lower than in
California.
"Moreover, as part of the plan we propose programs to help low-income customers
and to help residents and businesses manage their total energy bills."
In the plan filed today, the companies map out an emergency, comprehensive plan
to meet the state's short- and long-term energy needs, focusing on new
mechanisms to recover the skyrocketing cost of wholesale power and including
automatic price reductions as wholesale prices eventually fall. The plan also
calls for accelerated approval of new long-term power contracts and encourages
new power plant development.
Higgins said the plan also voices agreement with Nevada's go-slow approach to
electricity deregulation.
"The Nevada legislature and commission have shown a lot of foresight in how to
handle energy deregulation in the state, and there is no reason to go
backward," said Higgins. "What we need is to continue forward but in a way
that clearly anticipates the impact of market forces in the state."
Higgins noted that the pending sale of generation assets required as part of the
merger of Sierra Pacific Resources and Nevada Power will allow the companies to
buy power from the new plant
owners at discounted prices for two years. However, he said the California
turmoil has slowed the sales and put at risk these protective contracts.
Sierra Pacific and Nevada Power are proposing that the new mechanism take effect
on March 1, 2001. They propose that it be adjusted on March 1, 2002, or sooner
as wholesale prices fall and if divestiture of the utilities' Nevada power
plants is completed and contracts are in place that guarantee the company can
purchase power from those plants for two years at 1998 prices.
Nevada Power customers who use 400 kilowatt hours (kWh) of electricity or less
per month and Sierra Pacific customers who use 300 kWh of electricity or less
per month would not see this increase in their power bills due to the tiered
rate. The proposal represents an overall increase in rates of approximately 17
percent.
Higgins said that even with the July 2000 Global Settlement, which requires
Nevada Power and Sierra Pacific to file monthly rate adjustments for fuel and
purchased power (the F&PP Rider), the utilities have lost over $125 million on
fuel and purchased power transactions.
"We are losing millions and millions of dollars now and it will get much worse
if this plan is not adopted," Higgins said. "We stand to lose hundreds of
millions more because the caps on price increases are keeping rates artificially
low. When the settlement was negotiated, no one expected prices for fuel and
purchased power would continue to skyrocket to unheard of levels," Higgins said.
"We've saved over $30 million in operating efficiencies since the Sierra
Pacific-Nevada Power merger, but we simply do not have the same ability to
control $1.5 billion annually of fuel and purchased power expenses in an energy
marketplace that's gone haywire."
In today's filing, the utilities state they will continue to make the monthly
fuel and purchased power (F&PP) filings, which are scheduled to expire on March
1, 2003. Both the F&PP Rider and the new emergency Comprehensive Energy Plan
(CEP) Rider proposed in the plan represent dollar-for-dollar pass through of
wholesale costs.
If approved, the CEP Rider will result in a monthly power bill increase of
approximately $6.37 for a typical Sierra Pacific residential customer using 650
kilowatt hours (kWh) of electricity per month, and approximately $12.63 for a
typical Nevada Power residential customer using 1,100 kWh of electricity.
Up to $5 million in revenue generated by the CEP Rider would be provided to the
State of Nevada to be used at the state's discretion to fund conservation and
low-income protection programs.
The proposed tiered rate offers protection for residents with low electricity
usage and encourages consumers to be energy efficient. Residential CEP Rider
rates are based on electricity usage as follows:
Nevada Power
-- First 400 kWh per month No charge
-- Next 275 kWh per month $0.01500 per kWh
-- Above 675 kWh per month $0.02000 per kWh
Sierra Pacific Power
-- First 300 kWh per month No charge
-- Next 250 kWh per month $0.01500 per kWh
-- Above 550 kWh per month $0.02617 per kWh