Sierra Pacific profits loss means possible increase for users
Placing blame on surging power prices in a volatile wholesale market, the parent company of Sierra Pacific Power had an $18.2 million loss in fourth-quarter earnings in 2000, the Reno-based utility company reported Tuesday.
The loss equates to 23 cents a share for the common stock.
The poor-performing quarter gave Sierra Pacific Resources net losses in 2000 of $39.8 million, a 177 percent drop from 1999.
Company officials say they have no choice but to recover these substantial losses through rate increases that may begin as early as March 1.
Electricity rates for Lake Tahoe residents could go up by 17 percent to about $67.29 a month. The average residential customer, defined as a household using about 750 kilowatt hours a month, will pay an additional $6.37 a month, if the Nevada Public Utilities Commission approves the increase. The rate increase filed Jan. 29 is on the commission’s Friday meeting agenda.
“This loss is clear evidence that this problem is real and growing,” said Mark Ruelle, Sierra Pacific’s senior vice president and chief financial officer.
“Our employees have done a magnificent job keeping the lights on in Nevada and reducing expenses throughout our operations during this extraordinary period,” Ruelle said, adding the company has reduced operating expenses by 10 percent.
Quarterly operating expenses from October to December 2000 surged 69 percent to $571 million.
“However, without some rate relief, the cost of fuel and power is close to crippling our ability to serve the needs of our customers,” Ruelle said.
Sierra Pacific Power supplies electricity to more than 50,000 customers around the Lake Tahoe Basin.
Walter Higgins, the company chairman and chief executive officer, told investors during a conference call that the earnings report is reflective of the collapse of the energy market in the western United States, a situation that is not restricted solely to California.
Following the announcement, Sierra Pacific’s stock closed Tuesday afternoon at $11.80, down 3 cents a share.
“The difficulty is we’re buying product for more than we’re selling it,” company spokesman Karl Walquist said, adding the significant losses were not unexpected. “Particularly in the last few months, we’re not recovering those expenses.”
Despite an increase of nearly $30 million in retail revenues, Sierra Pacific Power also released a net income for 2000 of $2.1 million, $67 million less than in 1999.
While the company had gains in electric and natural gas retail revenues, the 130 percent increase in the cost of purchased and generated power blew away any chance of recovery for the year.
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