Profits jump in third quarter for Sierra Pacific

Higher power rates, customer growth and warm weather drove Sierra Pacific Resources' third-quarter net income up 44 percent from a year ago, after subtracting a one-time gain from the successful appeal of a rate case, the company reported Monday.

Net income for the third quarter was $152.2 million, compared with $222.2 million last year. But $116.2 million of the profit last year came from a Nevada Supreme Court ruling that reversed a rate case decision.

Profit in the third quarter a year ago was $106 million after subtracting the one-time gain.

"We're pleased with the quarter," said CEO Michael Yackira.

Nevada Consumer Advocate Eric Witkoski, however, was not pleased.

He noted that Nevada Power, Sierra Pacific Resources' Las Vegas-based subsidiary, raised residential rates this summer by 11.6 percent.

"When they raise rates as high as they did, they ought to make money," Witkoski said.

The quarterly results "show that general rates for Nevada Power and Sierra Pacific Power were excessive. That's detrimental to ratepayers," Witkoski said.

"Hopefully, the (Public Utilities Commission) is paying attention," he said.

The utilities commission raised general rates, which govern profits and treatment of nonfuel expenses, for Nevada Power on June 1. The general rates for Sierra Pacific Power of Reno were boosted in mid-2006.

The utility company also benefited from warmer weather and from an increase in the number of customers. Nevada Power's customer numbers continued to grow this year but at a slower pace than in the past. Nevada Power's customers increased by 3.2 percent during the 12 months ending in September, compared to 4.6 percent the previous 12 months.

The holding company said the utilities added 34,059 customers in Northern and Southern Nevada in the latest 12 months, compared with an increase of 50,239 in the prior year.

Chief Financial Officer Bill Rogers attributed customer growth to job growth and the increasing number of hotel rooms in Las Vegas.

The company's earnings per share were 69 cents, exceeding the consensus of nine analysts who predicted 60 cents a share. Sierra Pacific Resources earned $1.05 a share in the third quarter last year, when the one-time gain from the rate case reversal is included.

Shares in Sierra Pacific Resources rose 33 cents, or 2.09 percent, closing on the New York Stock Exchange at $16.12.

The utility holding company saw its interest expenses decline because of its improving bond rating and debt refinancing.

Moody's Investors Service upgraded Nevada Power and Sierra Pacific Power to investment grade for bonds earlier this month. That will reduce the utilities' interest expenses.

"Going forward, the cost of our debt will be lower," Yackira said.

During a conference call, analysts questioned company executives about the Ely Energy Center, a 1,500-megawatt coal-fired power plant that the company is developing near Ely in eastern Nevada.

Yackira said the Ely project will enable the company to shut down the three Reid Gardner coal-fired plants that are older and produce more carbon dioxide than the Ely plant would. He was asked if the company shouldn't obtain additional power from solar thermal power plants, which convert the sun's heat into electricity. Yackira said the cost of these solar facilities runs four to five times the cost of conventional plants.

The CEO said Nevada utilities get 70 percent of their power from gas-fired plants, which has resulted in volatile fuel costs. Yackira wants to diversify the fuel mix to 40 percent coal, 40 percent natural gas and 20 percent green or renewable power.

Nevada Power's third- quarter net income plunged to $133.1 million from $221.1 million because of the one-time gain from the rate case appeal a year ago. Operating revenues increased 15.2 percent to $894.2 million.

Earnings at Sierra Pacific climbed to $25.5 million from $20 million in the third quarter last year. Operating revenues edged up 2 percent to $311.8 million.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or (702) 383-0420.