Senate Bill No. 508–Committee on Commerce and Labor

 

March 26, 2001

____________

 

Referred to Committee on Commerce and Labor

 

SUMMARY—Requires audit of certain electric utilities, their affiliates, parent company and subsidiaries. (BDR S‑1453)

 

FISCAL NOTE:            Effect on Local Government: No.

                                    Effect on the State: Yes.

 

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to the regulation of public utilities; requiring an audit of certain electric utilities, their affiliates, parent company and subsidiaries; specifying the scope and conduct of the audit; and providing other matters properly relating thereto.

 

   Whereas, The legislature hereby finds and declares that it is the purpose and policy of the legislature to ensure that:

   1.  The rates charged by public utilities in this state for the generation, sale, distribution and transmission of electrical energy and capacity are just and reasonable; and

   2.  Electrical energy and capacity are made available in this state in a manner that is reliable and at a price which does not place an undue economic burden on the residents, businesses and public entities of this state; and

   Whereas, Ensuring the reliability and affordability of the provision of electric service within this state requires that the legislature familiarize itself with the details of the finances and operations of the electric utilities which serve a majority of the residents of this state, and with the details of the finances and operations of the affiliates, parent company and subsidiaries of those electric utilities; and

   Whereas, The legislature hereby finds and declares that a general law cannot be made applicable for all provisions of this act because of the fact that only two utilities provide electric service to a majority of the residents of this state; now, therefore,

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

1-1    Section 1. 1.  A financial and operational audit of the following

1-2  entities must be conducted and completed not later than April 15, 2001:

1-3    (a) Nevada Power Company;

2-1    (b) Sierra Pacific Power Company; and

2-2    (c) To the extent required pursuant to this section:

2-3       (1) The parent or holding company of Nevada Power Company and

2-4  Sierra Pacific Power Company, also known as Sierra Pacific Resources;

2-5  and

2-6       (2) Any affiliate or subsidiary of Nevada Power Company, Sierra

2-7  Pacific Power Company or Sierra Pacific Resources.

2-8    2.  The audit required pursuant to subsection 1 must:

2-9    (a) Be conducted by an independent, third-party auditor selected jointly

2-10  by the Majority Leader of the Senate and the Speaker of the Assembly. The

2-11  Majority Leader and the Speaker shall both execute the contract to hire the

2-12  auditor so selected. The auditor selected to conduct the audit:

2-13      (1) Shall work pursuant to the direction of the Legislative Auditor

2-14  and report to the Majority Leader of the Senate and the Speaker of the

2-15  Assembly; and

2-16      (2) May consult with the Bureau of Consumer Protection in the

2-17  Office of the Attorney General regarding the scope and conduct of the

2-18  audit.

2-19    (b) Provide a complete examination and reporting of all aspects of the

2-20  operation of Nevada Power Company and Sierra Pacific Power Company

2-21  to determine if each utility has adopted the best methods and combination

2-22  of sources of supply to meet future power demands or the best methods to

2-23  reduce such future power demands, as applicable. With respect to the

2-24  requirements set forth in this paragraph, particular attention must be

2-25  directed toward the appropriateness of each utility’s use of forward

2-26  purchase power contracts to avoid purchases of power on the spot market.

2-27    (c) Provide a complete examination and reporting of all transactions,

2-28  including, without limitation, cash flows, that occur between Nevada

2-29  Power Company and Sierra Pacific Power Company and between each of

2-30  those utilities and its affiliates, parent or holding company, subsidiaries and

2-31  other associated business entities. The examination required pursuant to

2-32  this paragraph must include an assessment of the reasonableness of such

2-33  transactions and the effect of such transactions on the rates charged by

2-34  Nevada Power Company and Sierra Pacific Power Company.

2-35    (d) Provide a complete examination and reporting of:

2-36      (1) The plans of Nevada Power Company and Sierra Pacific Power

2-37  Company, their affiliates, parent or holding company, and subsidiaries with

2-38  respect to the compensation that is paid to the executives and officers of

2-39  those entities, including, without limitation, salary, incentive plans and

2-40  performance plans; and

2-41      (2) The effect of such plans on the rates charged by Nevada Power

2-42  Company and Sierra Pacific Power Company.

2-43    (e) Provide a complete examination and reporting of:

2-44      (1) The gains, losses and expenses associated with mergers,

2-45  acquisitions or changes in control of Nevada Power Company and Sierra

2-46  Pacific Power Company, their affiliates, parent or holding company, and

2-47  subsidiaries; and

3-1       (2) The effect of such mergers, acquisitions or changes in control on

3-2  the rates charged by Nevada Power Company and Sierra Pacific Power

3-3  Company.

3-4  The examination required pursuant to this paragraph must include all

3-5  mergers, acquisitions or changes in control which have taken place during

3-6  the 3 calendar years immediately preceding the effective date of this act or

3-7  are scheduled to take place during the 3 calendar years immediately

3-8  succeeding the effective date of this act.

3-9    (f) Provide a complete examination and reporting of the following gains

3-10  and losses:

3-11      (1) The gains and losses, not associated with mergers, acquisitions or

3-12  changes in control, of the affiliates, parent or holding company, and

3-13  subsidiaries of Nevada Power Company and Sierra Pacific Power

3-14  Company;

3-15      (2) The gains and losses attributable to joint ventures entered into by

3-16  Nevada Power Company or Sierra Pacific Power Company; and

3-17      (3) The effect of the gains and losses described in subparagraphs (1)

3-18  and (2) on the rates charged by Nevada Power Company and Sierra Pacific

3-19  Power Company.

3-20    (g) Provide a complete examination and reporting of the financial

3-21  stability and creditworthiness of Nevada Power Company and Sierra

3-22  Pacific Power Company, their affiliates, parent or holding company, and

3-23  subsidiaries. The examination required pursuant to this paragraph must

3-24  include an assessment of:

3-25      (1) Relationships of credit and default;

3-26      (2) The ability of Nevada Power Company and Sierra Pacific Power

3-27  Company to obtain debt financing and equity financing; and

3-28      (3) The extent to which the justness and reasonableness of the

3-29  operation of Nevada Power Company and Sierra Pacific Power Company

3-30  has contributed to or detracted from their financial stability,

3-31  creditworthiness and ability to obtain financing.

3-32    (h) Provide a complete examination and reporting of any activities,

3-33  efforts and means to conserve and increase cash flows that have been

3-34  undertaken by Nevada Power Company and Sierra Pacific Power

3-35  Company, their affiliates, parent or holding company, and subsidiaries.

3-36    (i) Provide a complete examination and reporting of the federal income

3-37  tax returns, for 1999 and 2000, of Nevada Power Company and Sierra

3-38  Pacific Power Company, their affiliates, parent or holding company, and

3-39  subsidiaries.

3-40    (j) Provide an inventory of the miscellaneous assets of Nevada Power

3-41  Company and Sierra Pacific Power Company, their affiliates, parent or

3-42  holding company, and subsidiaries, including, without limitation,

3-43  undeveloped land, water rights, and tangible and intangible property.

3-44    (k) Include a complete examination and reporting of any other aspect of

3-45  the operation of Nevada Power Company and Sierra Pacific Power

3-46  Company, their affiliates, parent or holding company, and subsidiaries that,

3-47  in the judgment of the Majority Leader of the Senate, the Speaker of the

3-48  Assembly or the Legislative Auditor, is likely to have a material effect on:

4-1       (1) The justness and reasonableness of the rates charged by Nevada

4-2  Power Company and Sierra Pacific Power Company; or

4-3       (2) The ability of Nevada Power Company and Sierra Pacific Power

4-4  Company to attract debt capital and equity capital.

4-5    Sec. 2.  1.  To pay for the audit required pursuant to section 1 of this

4-6  act, the Public Utilities Commission of Nevada shall transfer the sum of

4-7  $300,000 from the public utilities commission regulatory fund, created by

4-8  NRS 703.147, to the legislative fund, created by NRS 218.085.

4-9    2.  Specific costs and expenses related to the audit must, after transfer

4-10  of the money to the legislative fund pursuant to subsection 1, be paid out

4-11  on claims approved by the Director of the Legislative Counsel Bureau or

4-12  his designee, as required pursuant to subsection 5 of NRS 218.085.

4-13    3.  After the audit is completed, the Director of the Legislative Counsel

4-14  Bureau shall ensure that any unused portion of the money transferred

4-15  pursuant to this section is returned to the public utilities commission

4-16  regulatory fund.

4-17    Sec. 3.  This act becomes effective upon passage and approval.

 

4-18  H