Sierra Pacific to study sale of electric system at Tahoe

Sierra Pacific Power Co. plans to study strategic alternatives including possible sale of its electric system in the Lake Tahoe area.

The utility headquartered at Reno serves about 46,000 electric customers in California. Most of them are in the Lake Tahoe area, although its service territory stretches from near Portola to near Markleeville.

Bill Rogers, the chief financial officer of Sierra Pacific Resources, noted that the 46,000 customers served by the company in California compares with 1.3 million customers served by his company's two subsidiaries

Nevada Power and Sierra Pacific Power in Nevada.

"We are very focused on Nevada," he said. "We have not put the focus on California that it deserves."

The California business is regulated by that state's Public Utilities Commission, which would need to give its blessing to any change in ownership.

Sierra Pacific Resources first announced its intent to consider the future of the Lake Tahoe system during a conference call with investment analysts last week.

Rogers said the company expects to move quickly to hire an advisor to walk Sierra Pacific Resources through its alternatives, but he said regulatory approval could take a year or more if a potential purchaser steps forward.

The Sierra Pacific service area around Lake Tahoe is bordered on the west by territory served by Pacific Gas & Electric, a subsidiary of San Francisco-based PG&E Corp. PG&E spokesmen didn't respond to a call last week asking if the company would be interested in buying the Sierra Pacific system.

Sierra Pacific Resources last week said it earned $3.7 million in the fourth quarter compared with $26.1 million in the same period a year earlier.

The 2006 earnings were boosted, however, by a one-time gain of nearly $41 million from the sale of Sierra Pacific's interest in the Tuscarora Gas Transmission Co.

After the report, analysts at Wachovia Capital Markets cut their rating of Sierra Pacific's common stock from "outperform" to "market perform."

Wachovia said clouds over the utility include slowing growth in Las Vegas and political and regulatory uncertainty over its plans to build a big coal-fired plants near Ely. Delays in plans for those facilities appear to be adding costs to a project that was projected at $3.8 billion when it was announced in late 2006, Wachovia said.

The analysts said Sierra Pacific has a solid management team and one of the fastest-growing service territories in the nation but the growth is a double-edged sword because it requires heavy investment in new generation and transmission facilities.