Electric users in northern Nevada can expect rates to rise by 5 to 10 percent in the middle of next year.
Top executives of Sierra Pacific Resources say, meanwhile, they're worried about the possibility that natural gas prices could rise rapidly in 2004.
While that's a potential problem for industries that rely on natural gas, it's also a threat to electric customers because power generators increasingly rely on natural gas.
The possibility of power rate increases come after Sierra Pacific Power, the Reno-based utility that serves northern Nevada, decreased its rates by 1.5 percent in the mid-2003.
In December, Sierra Pacific Power will ask the state Public Utilities Commission for a rate increase to cover the costs of doing business and will seek a return on $150 million in investment during the past two years to serve new customers.
Next spring, the company will ask PUC permission to recover the costs of wholesale energy purchases.
The combination of the two rate increases should total between 5 and 10 percent, Sierra Pacific Power President Jeff Ceccarelli told a gathering of business executives last week.
The increases won't be seen, however, until approximately June 1.
Walt Higgins, chairman of Sierra Pacific Resources, said he's concerned that demand for natural gas will push prices higher next year.
"The gas picture is not a pretty picture," he said.
That's particularly critical because Higgins' holding company which owns Nevada Power in Las Vegas as well as Sierra Pacific Power in Reno buys a significant amount of its electricity on the spot market.
Sierra Pacific Power, for instance, can generate only about two-thirds of the power it needs on the hottest summer days.
It buys the remainder on the open market, and that market will be heavily influenced by the price of the natural gas that generating companies buy as fuel.
"We have so little generation compared with most utilities that it puts us in a situation where we have to buy a lot of power on the market," Higgins said.
"It's a policy question that needs to be addressed."
A long-term answer, he said, may be construction of more generating plants in Nevada, either by his company or by merchant companies that build power plants and sell electricity to the highest bidder.
Higgins said Nevada Power already is talking with owners of existing merchant plants about firming up long-term contracts, or perhaps even buying the plants outright, to meet growing needs in the state.
The pressures on natural gas prices arise after the market has trended downward this year.
In two separate actions, Sierra Pacific Power has cut its natural gas price by a total of 6 percent during 2003.
Ceccarelli said Sierra Pacific Power expects to hook up about 10,000 new customers this figure, a figure that will set an annual record.
For the past decade, the number of customers served by the company has grown by 3 to 3.5 percent a year, but Ceccarelli said Sierra Pacific Power has cut the cost of hooking up a new customer to an average of $2,061 from $2,884 in 1997.
The company at the start of this year had 320,000 customers, compared with 259,000 in 1993.
To meet that growth, Sierra Pacific Power plans construction of new transmission lines and distribution facilities between Yerington and Douglas County, between Tracy and the fast-growing Fernley and Fallon areas, in Carson City and in the North Valleys.
By next summer, the company expects to complete an eastern Nevada transmission line that's the biggest power line project currently under way in the United States.
