When Walt Higgins, chairman of Sierra Pacific Resources and a former submarine officer, encountered the “perfect storm” six years ago, he turned to Donald “Pat” Shalmy.
Shalmy was a former Clark County manager and former president of the Las Vegas Chamber of Commerce but had no experience with electric utilities.
Higgins told Shalmy the company already had plenty of electrical engineers, accountants and regulatory experts. The utility chief wanted Shalmy to help the company restore good relations with major customers such as Strip casino operators, state regulators and political officials. And he wanted Shalmy to boost employee morale.
Shalmy joined the company as senior vice president of public policy and external affairs. Within two months, he was given added responsibility as president of subsidiary Nevada Power Co.
The 67-year-old Shalmy is leaving the company today, having accomplished the tasks assigned to him.
Shalmy recalls a slew of challenges bedeviling the company when he came aboard in May 2002.
Nevada Power had been preparing for deregulation and for competition for retail customers. At the last minute, the Legislature decided to continue with regulated electric utilities because electric utility deregulation was becoming a catastrophe in California. Rates in California were hitting the ceiling and utilities there often couldn’t obtain enough electricity and were being forced to cut consumption through rolling blackouts that forced neighborhoods to take turns doing without power.
Lights and air conditioners mostly stayed on in Southern Nevada, but the cost of power skyrocketed.
When Nevada Power Co. asked the Public Utilities Commission to approve a $922 million rate increase, the largest in history, hundreds of consumers gathered in meeting rooms around the valley, angrily complaining about the proposal.
In a scathing rebuke of utility management, the commission in March 2002 determined that almost half of the higher power costs resulted from imprudent power purchases and disallowed all but $486 million of the requested increase.
Higgins acknowledged that Nevada Power could be forced into bankruptcy.
In the summer of 2002, the Southern Nevada Water Authority made an unsolicited offer for Nevada Power, but Sierra Pacific Resources refused to consider it. In November 2002, voters by a 57 percent to 43 percent stated their preference for a not-for-profit electric utility. The vote was nonbinding.
A new state law gave large power users, such as casinos, an opportunity to exit the regulated system, but the Public Utilities Commission repeatedly rejected requests from these major customers for approval to buy power from competitors of the utility, saying it wasn’t in the public interest.
Shalmy listened to employee concerns in one-on-one meetings. He tried to reassure workers during giant staff meetings. To break the ice, he played a harmonica or guitar and sang songs he composed for the occasion, demonstrating more talent for comedy than music.
Tim Hay, who served as consumer advocate during those years, meanwhile, was subjecting Nevada Power management to a barrage of criticism. But Hay this week said the well-liked Shalmy handled his responsibilities well as part of a executive team that has “never been particularly forward-looking.”
Shalmy didn’t bring utility expertise to the company, as had previous utility presidents, Hay said, but Shalmy gave Nevada Power more credibility among community leaders.
“I think he performed for the company shareholders and always was compensated accordingly for the four or five years that he has been there,” Hay said. “He was hired for a particular purpose and probably discharged that purpose as well as anybody could.”
Shalmy attributed his success to employees: “We have a great team of officers and employees here. They are the ones that deserve the credit.”
Holding company CEO Michael Yackira is assuming Shalmy’s position as Nevada Power president. Tony Sanchez is succeeding Shalmy as corporate senior vice president.
Shalmy intends to relax: “I think my grandkids and fishing pole will keep me occupied.”
Contact reporter John G. Edwards at firstname.lastname@example.org or (702) 383-0420.