-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ec0d8qjRTditghHTEia7zjMnNm5pUgyzGdjgMFnYssOUUj8UQL93jlTwxZzD1Pv/ wUDoL27G/lhnyNjDj7xh0g== 0000898430-98-003024.txt : 19980817 0000898430-98-003024.hdr.sgml : 19980817 ACCESSION NUMBER: 0000898430-98-003024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIERRA PACIFIC POWER CO CENTRAL INDEX KEY: 0000090144 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 880044418 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00508 FILM NUMBER: 98689708 BUSINESS ADDRESS: STREET 1: 6100 NEIL RD STREET 2: P O BOX 10100 CITY: RENO STATE: NV ZIP: 89520-0400 BUSINESS PHONE: 7026895408 MAIL ADDRESS: STREET 1: 6100 NEIL ROAD STREET 2: P.O. BOX 10100 CITY: RENO STATE: NV ZIP: 89520 10-Q 1 FORM 10-Q FOR PERIOD ENDED 6/30/1998 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 0-508 SIERRA PACIFIC POWER COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEVADA 88-0044418 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 10100 (6100 Neil Road) Reno, Nevada 89520-0400 (89511) (Address of principal executive office) (Zip Code) (702) 834-4011 (Registrant's telephone number, including area code) Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Class Outstanding at August 14, 1998 Common Stock, $3.75 par value 1,000 Shares ================================================================================ SIERRA PACIFIC POWER COMPANY QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 CONTENTS
PART I - FINANCIAL INFORMATION ------------------------------ PAGE ---- ITEM 1. FINANCIAL STATEMENTS Report of Independent Accountants........................................................3 Condensed Consolidated Balance Sheets - June 30, 1998 and December 31, 1997...................................................................4 Condensed Consolidated Statements of Income - Three Months and Six Months Ended June 30, 1998 and 1997........................................................5 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1998 and 1997........................................................6 Notes to Condensed Consolidated Financial Statements.....................................7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................................8 PART II - OTHER INFORMATION --------------------------- ITEM 1. Legal Proceedings.......................................................................22 ITEM 5. Other Information.......................................................................22 ITEM 6. Exhibits and Reports on Form 8-K........................................................22 Signature Page.....................................................................................23 Appendix...........................................................................................25
2 INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Stockholder of Sierra Pacific Power Company Reno, Nevada We have reviewed the accompanying condensed consolidated balance sheet of Sierra Pacific Power Company and subsidiaries as of June 30, 1998, and the related condensed consolidated statements of income and cash flows for the three-month and six-month periods ended June 30, 1998 and 1997. These financial statements are the responsibility of the Corporation's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet and consolidated statement of capitalization of Sierra Pacific Power Company and subsidiaries as of December 31, 1997, and the related consolidated statements of income, common shareholder's equity, and cash flows for the year then ended (not presented herein); and in our report dated January 30, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1997, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. DELOITTE & TOUCHE LLP Reno, Nevada August 13, 1998 3 SIERRA PACIFIC POWER COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31, 1998 1997 ------------ ----------- (UNAUDITED) ASSETS Utility Plant at Original Cost: Plant in service $2,151,055 $2,063,269 Less: accumulated provision for depreciation 695,737 664,490 ---------- ---------- 1,455,318 1,398,779 Construction work-in-progress 168,439 202,036 ---------- ---------- 1,623,757 1,600,815 ---------- ---------- Investments in subsidiaries and other property, net 31,099 26,791 ---------- ---------- Current Assets: Cash and cash equivalents 7,443 6,920 Accounts receivable less provision for uncollectible accounts: $1,424 -1998 and $1,704 -1997 83,973 104,926 Materials, supplies and fuel, at average cost 26,126 25,255 Other 3,762 2,572 ---------- ---------- 121,304 139,673 ---------- ---------- Deferred Charges: Regulatory tax asset 66,454 66,563 Other regulatory assets 62,509 63,476 Other 16,586 14,924 ---------- ---------- 145,549 144,963 ---------- ---------- $1,921,709 $1,912,242 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholder's equity $ 644,726 $ 639,556 Preferred stock 73,115 73,115 Preferred stock subject to mandatory redemption: Company-obligated mandatorily redeemable preferred securities of the Company's subsidiary Sierra Pacific Power Capital I, holding solely $50 million principal amount of 8.6% junior subordinated debentures of the Company, due 2036 48,500 48,500 Long-term debt 601,712 606,889 ---------- ---------- 1,368,053 1,368,060 ---------- ---------- Current Liabilities: Short-term borrowings 88,400 75,000 Current maturities of long-term debt and preferred stock 461 454 Accounts payable 57,717 63,088 Accrued interest 5,790 6,394 Dividends declared 19,365 19,365 Accrued salaries and benefits 13,502 14,978 Other current liabilities 24,953 19,209 ---------- ---------- 210,188 198,488 ---------- ---------- Deferred Credits: Accumulated deferred federal income taxes 162,964 162,627 Accumulated deferred investment tax credit 38,890 39,873 Regulatory tax liability 39,725 40,767 Accrued Retirement Benefits 39,398 37,456 Customer advances for construction 33,064 38,478 Other 29,427 26,493 ---------- ---------- 343,468 345,694 ---------- ---------- $1,921,709 $1,912,242 ========== ==========
4 SIERRA PACIFIC POWER COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE-MONTHS ENDED SIX-MONTHS ENDED JUNE 30, JUNE 30, ----------------------------- ----------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ (UNAUDITED) (UNAUDITED) OPERATING REVENUES: Electric $135,169 $130,603 $277,308 $265,258 Gas 22,112 11,803 53,478 39,980 Water 11,862 12,411 21,079 21,437 ---------- ---------- ---------- ---------- 169,143 154,817 351,865 326,675 ---------- ---------- ---------- ---------- OPERATING EXPENSES: Operation: Purchased power 35,377 29,600 73,752 61,478 Fuel for power generation 27,447 26,838 51,327 49,645 Gas purchased for resale 13,510 5,545 32,841 20,337 Other 29,092 30,546 57,920 61,673 Maintenance 6,007 5,428 10,703 11,477 Depreciation and amortization 16,672 15,447 33,593 30,825 Taxes: Income taxes 8,742 10,068 21,402 22,911 Other than income 4,988 4,708 9,881 9,400 ---------- ---------- ---------- ---------- 141,835 128,180 291,419 267,746 ---------- ---------- ---------- ---------- OPERATING INCOME 27,308 26,637 60,446 58,929 ---------- ---------- ---------- ---------- OTHER INCOME: Allowance for other funds used during construction 1,155 1,494 2,126 2,928 Other income - net (275) 309 (153) 562 ---------- ---------- ---------- ---------- 880 1,803 1,973 3,490 ---------- ---------- ---------- ---------- Total Income 28,188 28,440 62,419 62,419 ---------- ---------- ---------- ---------- INTEREST CHARGES: Long-term debt 9,720 10,084 19,487 20,030 Other 1,759 1,162 3,668 1,962 Allowance for borrowed funds used during construction and capitalized interest (2,039) (1,186) (3,721) (2,354) ---------- ---------- ---------- ---------- 9,440 10,060 19,434 19,638 ---------- ---------- ---------- ---------- INCOME BEFORE OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES 18,748 18,380 42,985 42,781 Preferred dividend requirements of Company-obligated mandatorily redeemable preferred securities (1,043) (1,043) (2,086) (2,086) ---------- ---------- ---------- ---------- INCOME BEFORE PREFERRED DIVIDENDS 17,705 17,337 40,899 40,695 Preferred dividend requirements (1,365) (1,365) (2,730) (2,730) ---------- ---------- ---------- ---------- INCOME APPLICABLE TO COMMON STOCK $ 16,340 $ 15,972 $ 38,169 $ 37,965 ========== ========== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 5 SIERRA PACIFIC POWER COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ---------------------------------- 1998 1997 -------------- --------------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Income before preferred dividends $ 40,899 $ 40,695 Non-cash items included in income: Depreciation and amortization 33,593 30,825 Deferred taxes and deferred investment tax credit (1,579) (2,509) AFUDC and capitalized interest (5,846) (5,282) Early retirement and severance amortization 2,109 2,446 Other non-cash 1,427 (1,706) Changes in certain assets and liabilities: Accounts receivable 16,570 13,700 Materials, supplies and fuel (871) 2,551 Other current assets (1,190) (703) Accounts payable (5,371) (13,524) Other current liabilities 3,664 116 Other - net 36 (2,173) ----------- ------------ Net Cash Flows From Operating Activities 83,441 64,436 ----------- ------------ CASH FLOWS USED IN INVESTING ACTIVITIES: Additions to utility plant (66,454) (68,095) Net customer refunds and contributions in aid construction 10,319 9,889 ----------- ------------ Net cash used for utility plant (56,135) (58,206) ----------- ------------ (Investments in) disposal of subsidiaries and other property - net 98 (371) ----------- ------------ Net Cash Used In Investing Activities (56,037) (58,577) ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Increase in short-term borrowings 14,037 34,349 Reduction of long-term debt (5,188) (15,215) Investment from the parent company 5,000 10,000 Dividends paid (40,730) (36,730) ----------- ------------ Net Cash Used In Financing Activities (26,881) (7,596) ----------- ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS 523 (1,737) Beginning balance in Cash and Cash Equivalents 6,920 890 ----------- ------------ Ending balance in Cash and Cash Equivalents $ 7,443 $ (847) =========== ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash Paid During Period For: Interest $ 25,178 $ 23,119 Income Taxes $ 36,588 $ 54,575
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- NOTE 1. MANAGEMENT'S STATEMENT - --------------------------------- In the opinion of the management of Sierra Pacific Power Company, hereafter known as the Company, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the condensed consolidated financial position, condensed consolidated results of operations and condensed consolidated cash flows for the periods shown. These condensed consolidated financial statements do not contain the complete detail or footnote disclosure concerning accounting policies and other matters which are included in full year financial statements and therefore, they should be read in conjunction with the Company's audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. Deloitte & Touche LLP, the Company's independent accountants, have performed a review of the unaudited consolidated financial statements, and their report has been included in this report. The results of operations for the three and six month periods ended June 30, 1998 are not necessarily indicative of the results to be expected for the full year. Principles of Consolidation --------------------------- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Sierra Pacific Power Capital I, Pinon Pine Corp., and Pinon Pine Investment Co. All significant intercompany transactions and balances have been eliminated in consolidation. Reclassifications ----------------- Certain items previously reported for years prior to 1998 have been reclassified to conform with the current year's presentation. Net income and shareholder's equity were not affected by these reclassifications. NOTE 2. RECENT PRONOUNCEMENTS OF THE FASB - ------------------------------------------- On June 30, 1997, the FASB issued SFAS 131 entitled "Disclosure About Segments of an Enterprise and Related Information". This statement establishes additional standards for segment reporting in the financial statements and is effective for fiscal years beginning after December 15, 1997. Management has concluded that the Company will continue to define its primary operating segments as electric, gas and water. The Company expects to provide the additional disclosure requirements of this statement in its Annual Report on Form 10-K for the year ended December 31, 1998. In February 1998, the FASB issued SFAS 132 entitled "Employers' Disclosures about Pensions and Other Postretirement Benefits". This statement revises employers' disclosures about pension and other postretirement benefit plans for fiscal years beginning after December 15, 1997. The statement does not change the measurement or recognition of those plans. Therefore, management believes this statement will not have a material impact on the financial statements of the Company. NOTE 3. LONG TERM DEBT - ------------------------ The Company redeemed $ 5 million of 8.65% medium term notes on June 18, 1998. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS WHEN USED ANYWHERE IN THIS FORM 10-Q, OR THE FORM 10-Q OF SIERRA PACIFIC RESOURCES AND IN FUTURE FILINGS BY SIERRA PACIFIC RESOURCES OR SIERRA PACIFIC POWER COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION, IN SIERRA PACIFIC RESOURCES OR SIERRA PACIFIC POWER COMPANY'S PRESS RELEASES AND IN ORAL STATEMENTS MADE WITH THE APPROVAL OF AN AUTHORIZED EXECUTIVE OFFICER, THE WORDS OR PHRASES "WILL LIKELY RESULT", "ARE EXPECTED TO", "WILL CONTINUE", "IS ANTICIPATED", "ESTIMATED", "PROJECT", OR "OUTLOOK" OR SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL EARNINGS AND THOSE PRESENTLY ANTICIPATED OR PROJECTED. SIERRA PACIFIC POWER COMPANY WISHES TO CAUTION READERS NOT TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE. SIERRA PACIFIC POWER COMPANY WISHES TO ADVISE READERS THAT VARIOUS FACTORS DESCRIBED IN THESE FORMS 10-Q COULD CAUSE SIERRA PACIFIC POWER COMPANY'S ACTUAL RESULTS FOR FUTURE PERIODS TO DIFFER MATERIALLY FROM ANY OPINIONS OR STATEMENTS EXPRESSED WITH RESPECT TO FUTURE PERIODS IN ANY CURRENT STATEMENTS. SIERRA PACIFIC POWER COMPANY SPECIFICALLY DECLINES ANY OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS WHICH MAY BE MADE TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS OR TO REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS. The Company's business is subject to seasonal fluctuations based upon weather patterns. Significant portions of the Company's net revenues and profits are typically realized during the first and third quarters of the Company's year, which includes the peak heating and cooling periods. Because of the seasonality of the Company's business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. 8 RESULTS OF OPERATIONS --------------------- Electric Operations - ------------------- The components of gross margin for electric operations were (dollars in thousands):
Three Months Ended June 30, ------------------------- Increase Increase 1998 1997 (Decrease) (Decrease) % ------------ ----------- ------------ ------------ Electric Operating Revenues (dollars): Residential $ 37,117 $ 35,863 $ 1,254 3.5% Commercial 42,068 43,736 (1,668) -3.8% Industrial 45,758 42,566 3,192 7.5% ---------- ---------- -------- ---- Electric Revenues before Other 124,943 122,165 2,778 2.3% Other 10,226 8,438 1,788 21.2% ---------- ---------- -------- ---- Total Revenues 135,169 130,603 4,566 3.5% Electric Energy Costs: Purchased Power 35,377 29,600 5,777 19.5% Fuel for Power Generation 27,447 26,838 609 2.3% ---------- ---------- -------- ---- Total Energy Costs 62,824 56,438 6,386 11.3% ---------- ---------- -------- ---- Gross Electric Margin $ 72,345 $ 74,165 $ (1,820) -2.5% ========== ========== ======== ==== Electric Operating Revenues Megawatt-Hours (MWH): Total MWH Sales 2,225,182 1,948,035 277,147 14.2% Less: Other Sales MWH 279,483 107,240 172,243 160.6% ---------- ---------- -------- ---- Electric Sales before Other Sales MWH 1,945,699 1,840,795 104,904 5.7% ---------- ---------- -------- ---- Average Revenues per MWH $ 64.21 $ 66.37 $ (2.16) -3.2%
Residential customer revenues increased due to an increase in customers of 3. 0% over the same period in the prior year. Commercial revenues were lower in 1998 due to a decrease in customer use. Industrial revenues increased as a result of higher use per customer (primarily in the mining segment) which was partially offset by an adjustment that increased revenues by $1.9 million in June 1997 for the reversal of a prior year accrual. Other revenues increased primarily because of an increase in resale sales due to increased focus on this business opportunity. 9 Purchased power energy costs in the preceding table consisted of the following total MWHs and average electric costs:
Three Months Ended June 30, ---------------------------- Increase/ Increase/ 1998 1997 (Decrease) (Decrease)% -------------- ------------ ------------ ------------- Purchased Power MWH 1,168,352 852,712 315,640 37.0% Average cost per MWH of Purchased Power $ 30.28 $ 34.71 $ (4.43) -12.8%
The total cost of purchased power increased because of an increase in the volume purchased due to system load growth and additional resale sales in 1998. The increase in the cost of purchased power was partially offset by a reduction in the cost per MWH due to an increase in the amount of non-firm purchases relative to firm purchases. Secondary purchases were considerably less expensive per MWH. Fuel for power generation provided the total megawatt-hours (MWHs) and average electric costs are as follows (dollars in thousands):
Three Months Ended June 30 ------------------------------- Increase/ Increase/ 1998 1997 (Decrease) (Decrease)% ------------- -------------- ------------- ------------- Fuel for Power Generation $ 27,447 $ 26,838 $ 609 2.3% Power Generated MWH 1,223,265 1,231,469 (8,204) -0.7% Average cost per MWH of generation fuel $ 22.44 $ 21.79 $ (0.65) 3.0%
The increase in the cost of fuel for power generation in the second quarter of 1998 over the prior year was the result of higher fuel costs. The cost of gas used for generation increased approximately 12.8% over the prior year. Also, inexpensive coal purchased on the spot market during the first three months of 1998 was not available to reduce the total cost of fuel for generation during the second quarter of 1998. 10 The components of gross margin for electric operations were (dollars in thousands):
Six Months Ended June 30, ------------------------------------------ Increase Increase 1998 1997 (Decrease) (Decrease) % ------------------ ------------------ -------------- -------------- Electric Operating Revenues (dollars): Residential $83,643 $80,999 $2,644 3.3% Commercial 83,870 84,319 (449) -0.5% Industrial 89,750 84,286 5,464 6.5% ------------------ ------------------ -------------- ----------- Electric Revenues before Other 257,263 249,604 7,659 3.1% Other 20,045 15,654 4,391 28.1% ------------------ ------------------ -------------- ----------- Total Revenues 277,308 265,258 12,050 4.5% Electric Energy Costs: Purchased Power 73,752 61,478 12,274 20.0% Fuel for Power Generation 51,327 49,645 1,682 3.4% ------------------ ------------------ -------------- ----------- Total Energy Costs 125,079 111,123 13,956 12.6% ------------------ ------------------ -------------- ----------- Gross Electric Margin $152,229 $154,135 ($1,906) -1.2% ================== ================== ============== =========== Electric Operating Revenues Megawatt-Hours (MWH): Total MWH Sales 4,501,561 3,897,759 603,802 15.5% Less: Other Sales MWH 531,347 210,235 321,112 152.7% ------------------ ------------------ -------------- ----------- Electric Sales before Other Sales MWH 3,970,214 3,687,524 282,690 7.7% ------------------ ------------------ -------------- ----------- Average Revenues per MWH $64.80 $67.69 ($2.89) -4.3%
Residential revenue increased due to an overall increase in customers of 3.00%. The increases in revenue was partially offset by a rate reduction that went into effect in March 1997. Commercial revenues were lower because of a decrease in customer use which was partially offset by an increase in customers. Industrial revenues increased because of higher use per customer. The increase was in part offset by both an increase of $1.9 million in June 1997 revenues (the reversal of a prior year accrual) and a decrease in effective rates beginning in March 1997. Other revenues increased primarily due to an increase in wholesale sales and additional facilities surcharge revenue because of an increased focus on wholesale business and opportunities to provide facilities to industrial customers. 11 Purchased power energy costs in the preceding table consisted of the following total MWHs and average electric costs:
Six Months Ended June 30, ---------------------------- Increase/ Increase/ 1998 1997 (Decrease) (Decrease)% ------------- ----------- ------------ ------------- Purchased Power MWH 2,356,554 1,786,442 570,112 31.9% Average cost per MWH of Purchased Power $ 31.30 $ 34.41 $ (3.11) -9.0%
Purchased power costs increased because of an increase in the volume of purchased power due to system load growth and additional resale sales in 1998. The increase in the cost of purchased power was partially offset by a reduction in the cost per MWH due to an increase in the amount of secondary energy purchases relative to firm purchases in 1998. Secondary energy purchases were considerably less expensive per MWH. Fuel for power generation provided the following total megawatt-hours and average electric costs (dollars in thousands):
Six Months Ended June 30 ---------------------------- Increase/ Increase/ 1998 1997 (Decrease) (Decrease)% ------------- ----------- ------------ ------------- Fuel for Power Generation $ 51,327 $ 49,645 $ 1,682 3.4% Power Generated MWH 2,453,018 2,341,984 111,034 4.7% Average cost per MWH of generation fuel $ 20.92 $ 21.20 $ (0.28) -1.3%
The cost of fuel for generation for the six month period ended June 30, 1998 was higher than the comparable period in 1997 because of increased generation requirements needed to meet continued customer growth. The increase in the cost of fuel for generation was partially offset by a reduction in the cost per MWH due to the availability of less expensive spot market coal available during the first quarter of 1998. 12 GAS OPERATIONS - -------------- The components of gross margin for gas operations were (dollars in thousands):
Three Months Ended June 30, -------------- Increase/ Increase/ 1998 1997 (Decrease) (Decrease)% ------------- ------------- ------------- ----------- Gas Operating Revenues: Residential $ 8,457 $ 5,822 $ 2,635 45.3% Commercial 4,458 3,272 1,186 36.2% Industrial 2,721 2,455 266 10.8% Miscellaneous 312 247 65 26.3% ------- ------- ------- ------ Gas revenues before wholesale sales 15,948 11,796 4,152 35.2% Wholesale sales 6,164 7 6,157 Total revenues 22,112 11,803 10,309 87.3% ------- ------- ------- ------ Gas Energy Costs: Wholesale sale purchases 5,702 7 5,695 Other gas purchases 7,808 5,538 2,270 41.0% Total gas purchased for resale 13,510 5,545 7,965 143.6% ------- ------- ------- ------ Gross Gas Margin $ 8,602 $ 6,258 $ 2,344 37.5% ======= ======= ======= ======
Gas operating revenues above consisted of the following sales in decatherms and average gas revenues:
Three Months Ended June 30, -------------- Increase Increase 1998 1997 (Decrease) (Decrease)% ------------- ------------- ------------- ----------- Gas Operating Revenues (Decatherms): Wholesale sales 3,346,159 5,493 3,340,666 Gas revenues before wholesale sales 2,810,977 2,053,486 757,491 36.9% ------------- ------------- ------------- -------- Total revenues 6,157,136 2,058,979 4,098,157 199.0% ------------- ------------- ------------- -------- Average Revenues per Decatherm Wholesale sales $ 1.84 $ 1.27 $ 0.57 44.9% Gas revenues before wholesale sales $ 5.67 $ 5.74 $ (0.07) -1.2%
Wholesale sales in 1998, not present in the second quarter of 1997, reflect continued focus on this business opportunity. Residential, commercial and industrial revenues increased over the prior year due to customer growth and colder weather in 1998. 13 Gas energy costs consisted of the following decatherm purchases and average gas costs:
Three Months Ended June 30, ---------------------------- Increase/ Increase/ 1998 1997 (Decrease) (Decrease)% ------------ ----------- ------------- ------------- Gas energy costs (decatherms): Wholesale sale purchases 3,329,213 5,493 3,323,720 Other gas purchases 2,881,142 2,533,453 347,689 13.7% ------------ ----------- ------------- ------------- Total gas purchased for resale 6,210,355 2,538,946 3,671,409 144.6% ------------ ----------- ------------- ------------- Average cost per Decatherm Wholesale sale purchases $ 1.71 $ 1.27 $ 0.44 34.6% Other gas purchases $ 2.71 $ 2.19 $ 0.52 23.7%
Consistent with the increase in gas sales from customer growth and colder weather in 1998, other gas purchases (decatherms) were higher in 1998. The average cost per decatherm was also higher because of an increase in the unit cost of firm and spot purchases. The components of gross margin for gas operations were (dollars in thousands):
Six Months Ended June 30, -------------- Increase/ Increase/ 1998 1997 (Decrease) (Decrease)% ------------- ------------ ------------ ------------- Gas Operating Revenues: Residential $ 24,527 $ 20,792 $ 3,735 18.0% Commercial 13,102 11,303 1,799 15.9% Industrial 6,569 6,217 352 5.7% Miscellaneous 647 484 163 33.7% ------------- ------------ ------------ ------------- Gas revenues before wholesale sales 44,845 38,796 6,049 15.6% Wholesale sales 8,633 1,184 7,449 629.1% ------------- ------------ ------------ ------------- Total revenues 53,478 39,980 13,498 33.8% ------------- ------------ ------------ ------------- Gas Energy Costs: Wholesale sale purchases 8,132 867 7,265 837.9% Other gas purchases 24,709 19,470 5,239 26.9% ------------- ------------ ------------ ------------- Total gas purchased for resale 32,841 20,337 12,504 61.5% ------------- ------------ ------------ ------------- Gross Gas Margin $ 20,637 $ 19,643 $ 994 5.1% ============= ============ ============ =============
14 Gas operating revenues above consisted of the following sales in decatherms and average gas revenues:
Six Months Ended June 30, ----------------------------- Increase Increase 1,998 1997 (Decrease) (Decrease) % -------------- ------------ --------------- --------------- Gas Operating Revenues (Decatherms): Wholesale sales 4,582,449 511,872 4,070,577 795.2% Gas revenues before wholesale sales 8,061,047 6,886,362 1,174,685 17.1% -------------- ------------ --------------- --------------- Total revenues 12,643,496 7,398,234 5,245,262 70.9% -------------- ------------ --------------- --------------- Average Revenues per Decatherm Wholesale sales $ 1.88 $ 2.31 $ (0.43) -18.6% Gas revenues before wholesale sales $ 5.56 $ 5.63 $ (0.07) -1.2%
Residential, commercial and industrial revenues increased over the prior year due to a 5.2% increase in customers and colder than normal weather in 1998. The increase was partially offset by a reduction in rates in the first quarter of 1998. Increased wholesale sales in 1998 reflect continued focus on this business opportunity. Gas energy costs consisted of the following decatherm purchases and average gas costs:
Six Months Ended June 30, ------------------------------- Increase/ Increase/ 1998 1997 (Decrease) (Decrease)% ------------- ------------- ------------- --------------- Gas energy costs (decatherms): Resale sale purchases 4,584,923 511,872 4,073,051 795.7% Other gas purchases 8,129,377 7,202,149 927,228 12.9% ------------- ------------- ------------- --------------- Total gas purchased for resale 12,714,300 7,714,021 5,000,279 64.8% ------------- ------------- ------------- --------------- Average cost per Decatherm Resale sale purchases $ 1.77 $ 1.69 $ 0.08 4.7% Other gas purchases $ 3.04 $ 2.70 $ 0.34 12.6%
Consistent with the increase in gas sales from customer growth and colder weather in 1998, other gas purchases (decatherms) were higher in 1998. The average cost per decatherm of all purchases was also higher because of an increase in the unit cost of firm and spot purchases. Water Operations - ----------------
Three Months Ended June 30, -------------- Increase/ Increase/ 1998 1997 (Decrease) $ (Decrease) % ------------- ------------- ------------- --------------- Water Operating Revenues: Sales and gross water margin $ 11,862 $ 12,411 $ (549) -4.4% ============= ============= ============= ===============
15 Water sales were lower in the second quarter of 1998 because of an unusually wet spring in northern Nevada that reduced the need for irrigation. Water sendout in gallons for the second quarter of 1998 was approximately 38% lower than the same period in 1997. The effect of the lower usage on revenues was partially offset by the price increase effective April 2, 1998 and by a 3.2 % increase in total customers over the prior year.
Six Months Ended June 30, -------------- Increase/ Increase/ 1998 1997 (Decrease) $ (Decrease) % ------------- ------------- ------------ ------------ Water Operating Revenues: Sales and gross water margin $21,079 $21,437 $ (358) -1.7% ============= ============= ============ ============
Water sales for the first six months of 1998 were slightly less than the prior year. The same factors which contributed to lower sales in the second quarter of 1998, a wetter than normal spring offset by more customers and higher prices, were also responsible for the decrease in sales during the first six months. Other Financial Information - ---------------------------
Three Months Ended June 30, -------------- Increase/ Increase/ 1998 1997 Decrease $ Decrease % ---------- ---------- ---------- ---------- Allowance for other funds used during construction $1,155 $1,494 $(339) -22.7% Allowance for borrowed funds used during construction 2,039 1,186 853 71.9% ------ ------ ----- ------ $3,194 $2,680 $ 514 19.2% ------ ------ ----- ------
Total allowance for funds used during construction was higher in the second quarter of 1998 over the comparable period in 1997 because of the continuing construction of the Alturas transmission project and the Pinion Pine power project (Pinon was completed in June 1998).
Six Months Ended June 30, -------------- Increase/ Increase/ 1998 1997 Decrease $ Decrease % ---------- ---------- ---------- ---------- Allowance for other funds used during construction $2,126 $2,928 $ (802) -27.4% Allowance for borrowed funds used during construction 3,721 2,354 1,367 58.1% ------ ------ ------ ------ $5,847 $5,282 $ 565 10.7% ------ ------ ------ ------
The total allowance for funds used during construction was higher for the first six months of 1998 over the comparable period in 1997 for the same reasons described in the preceding second quarter 1998 discussion. 16 The following table includes other items of financial information that varied materially from the same items in the second quarter of 1997:
Three Months Ended June 30, --------------------------- Increase/ Increase/ 1998 1997 (Decrease)$ (Decrease)% --------- --------- ------------ ------------ Depreciation and amortization $16,672 $15,447 $ 1,225 7.9% Income Taxes 8,742 10,068 (1,326) 13.2%
Depreciation and amortization expense increased due to water division additions and other customer improvements added to plant in service late in 1997. Operating income taxes decreased due to a reclassification of interest expense to operating income from non-operating income that lowered operating income before income taxes and a lower effective tax rate in the 1998 period. The following table includes other items of financial information that varied materially from the same items in 1997:
Six Months Ended June 30, ------------------------- Increase/ Increase/ 1998 1997 (Decrease)$ (Decrease)% ----------- ----------- ------------- ------------- Other operating expense $57,920 $61,673 $(3,753) -6.1% Depreciation and amortization 33,593 30,825 2,768 9.0% Income Taxes 21,402 22,911 (1,509) 6.6% Interest Charges-Other 3,668 1,962 1,706 87.0%
Other operating expense decreased due to higher stock compensation plan costs and post-retirement benefits experienced in 1997. Also, 1998 costs were lower because of the water rate case decision which directed the Company to capitalize certain costs of approximately $0.6 million which were previously expensed. Depreciation and amortization expense was higher because of water division additions and other customer improvements added to plant in service late in 1997. Operating income taxes were lower in 1998 due to lower operating income before income taxes and a reduction in the effective tax rate. A reclassification in 1998 of interest expense from non-operating income to operating income contributed to the reduction of operating income. Interest charges - other - increased because of higher short-term debt balances in 1998. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES ---------------------------------------------------- During the first six months of 1998, the Company earned $40.9 million in income before preferred dividends, declared $2.7 million in dividends to holders of its preferred stock, and declared $38 million in common stock dividends to its parent, Sierra Pacific Resources. 17 CONSTRUCTION EXPENDITURES AND FINANCING - --------------------------------------- The Company's construction program and capital requirements for the period 1998-2002 were originally discussed in the Company's 1997 Annual Report on Form 10-K. Of the amount projected for 1998, as of June 30, 1998, $56.1 million (37.1%) had been spent. Of this amount, approximately 83.9% was provided by internally-generated funds. ALTURAS INTERTIE - ---------------- As of June 30, 1998, the Company had spent approximately $100 million on the Alturas Intertie transmission line. The current estimated total construction cost, including AFUDC, is approximately $159 million. The increase in the estimated construction cost of approximately $8.4 million over the amount previously reported is due to higher costs associated with regulatory compliance as well as enhanced construction techniques which are expected to expedite completion of the project. Construction of the project is expected to be completed in late 1998. For further discussion of major projects, refer to the Company's 1997 Annual Report on Form 10-K. PINON PINE - ---------- On June 17, 1998, the Company completed the construction of the coal gasifier portion of the Pinon Pine Power Project. The Company expects that based on the in-service date, the performance warranty requirements, as described in the Company's Annual Report on Form 10-K for 1997, will not be met by December 31, 1998. Consequently, the Company had a reserve of $1.8 million as of June 30, 1998 which represents the entire contingency for the year. Also, because the project will not meet contracted performance levels, the Company may be required to refinance General Electric Capital Corporation's (GECC) investment in Pinon Pine Company LLC. If the Company is required to buyout GECC, it is estimated that the additional investment required would be approximately $30 million. For more information concerning the Pinon Pine Power project see the Company's Annual Report on Form 10-K for 1997. REGULATORY MATTERS - ------------------ NEVADA As a result of the rate plan referred to in the Company's Form 10-K for 1997, the Company made its first earnings sharing filing on April 29, 1998. For its electric division customers, the Company recommended a refund of $7.321 million based upon calendar year 1997 results. The Company also proposed a refund of $1.694 million to its gas division customers for results of the same period. The Company expects the outcome of the filing within 180 days of the filing date. As mentioned in its 1997 Form 10-K, the Company has requested permission from the Public Utilities Commission of Nevada (PUCN) to continue to serve customers in the Truckee-Carson Irrigation District leasehold area upon expiration of the leasehold agreement (June 1998). On June 26, 1998, the Commission issued its interim order requiring the Company to continue serving the area until a final order is issued. The final order is expected by the fall of 1998. On July 1, 1998, the Company filed its electric resource plan with the PUCN. The plan discusses generation and transmission alternatives that would supply Northern Nevada with electricity for the period 1998 through 2017. The Company expects the PUCN to rule on this filing by November 12, 1998. As reported in Sierra Pacific Resources (SPR) report on Form 8-K filed on July 7, 1998, SPR, the parent company of Sierra Pacific Power Company, filed with the PUCN a joint application with Nevada Power Company for an order authorizing a merger. Among other issues in the PUCN merger application, the filing addresses: . Benefits of the merger to employees and stockholders. . The impact of the proposed merger on competition and electricity prices. . Operation of the electric transmission system to ensure competing energy suppliers have equal access to customers. A decision from the PUCN is expected within 180 days of the filing date. 18 With regard to Nevada Assembly Bill 366 (electric and gas utility restructuring) previously discussed in the Company's 1997 Form 10-K, the PUCN opened several dockets to investigate issues relating to restructuring: Docket 97-8001 is the general electric restructuring docket, covering unbundled electric services, potentially competitive services, licensing, non-price terms and conditions for distribution service, market power, stranded costs and provider of last resort. The PUCN has issued several draft rules for comment. An independent scheduling agent (ISA) is being considered for the state to mitigate market power issues. Docket 97-11018 was opened for unbundling of Sierra's costs into the eight unbundled services and to delineate transmission and distribution facilities applying FERC's seven criteria outlined in its Order 888. Docket 97-5034 establishes rules for both electric and gas utilities related to sharing of corporate services, employee transfers between affiliates, non-discriminatory treatment of affiliates and non-affiliates, audits, sharing of name and logo and penalties for violation of these rules for both electric and gas utilities. Docket 97-8002 was opened to investigate issues relating to compliance with Nevada AB 366 for natural gas issues. The docket addresses unbundling of services, potentially competitive designation of services, licensing, and alternative plans of regulation. In early 1998 the PUCN issued "OII Number Two" requesting comments on four subject areas: which services should become "potentially competitive"; guidelines for distribution open access tariffs; consumer protection; and licensing of alternative sellers. Comments have been filed and workshops have been held on these matters: Potentially Competitive Services -------------------------------- On June 8, 1998 the PUCN issued an order determining that billing, metering, and customer services should be declared "potentially competitive" effective December 31, 1999. Generation services were already deemed to be potentially competitive by AB 366. On June 23, 1998 the Company and Nevada Power filed Petitions for Reconsideration, arguing that the PUCN did not follow the proper administrative procedures. On July 15, 1998 the PUCN granted the Company's petition to reconsider this Order. The PUCN agreed that an application should be filed and a hearing should be held. The PUCN set a date of August 26, 1998 for the Company and Nevada Power to file applications for the services the utilities wish to be declared potentially competitive. If either the Company or Nevada Power do not file applications the PUCN Staff will file an application on September 2, 1998. Distribution Open Access Tariffs -------------------------------- On June 4, 1998 the PUCN voted to issue a proposed rule on distribution tariffs. This rule establishes the open access obligations of electric distribution utilities. Electric distribution utilities will be required to file tariffs in compliance with guidelines established in this proposed rule. A workshop to discuss the proposed rule will be held later in the year. Licensing of Alternative Sellers and Consumer Protection Requirements for ------------------------------------------------------------------------- Alternative Sellers ------------------- After soliciting comments and holding workshops, on June 26, 1998 the PUCN issued proposed rules on licensing of alternative sellers and consumer protection requirements for alternative sellers. These rules provide the licensing and reporting requirements of alternative sellers and establish the conduct required when alternative sellers provide generation or aggregation services to residential and small commercial customers. Workshops will be scheduled on these proposed rules later in the year. On April 27, 1998 the PUCN issued OII Number Three which requested comments and scheduled workshops in three areas: Load Pockets and Market Power, Transition Costs, and Provider of Last Resort. Comments and initial workshops are completed. Load Pockets and Market Power ----------------------------- As a result of the workshop the PUCN asked the parties to form a working group to further explore the Independent Scheduling Agent (ISA) concept. The working group is discussing ISA models presented by Enron, the utilities, and 19 other parties. The group is also discussing a series of questions provided by the PUCN. A working group report on ISA issues is to be filed by August 14, 1998. PUCN staff will file a report on load pocket mitigation by August 21, 1998. A third report, dealing with generation aggregation issues, is to be filed by September 2, 1998. Hearings will be held in September 1998. Transition Costs ---------------- The Company filed an extensive response to transition cost questions including a "white paper" which addressed many aspects of transition costs. The PUCN established a working group to resolve various issues that include mitigation standards; filing requirements; tax and accounting issues; and recovery mechanisms. The Company and Nevada Power are developing a proposal for transition cost issues which will be discussed with the working group in August 1998. Provider of Last Resort ----------------------- The Provider of Last Resort (PLR) will provide electric service to customers who do not choose and customers who are not able to find service with an alternative seller. In its workshop on PLR, the PUCN explored three different scenarios for providing service to such customers. One option is for an affiliate of the distribution company to be the PLR. The second option is a balloting process where customers would choose a supplier or be assigned by the PUCN to a supplier. The third option is a process where alternative sellers bid to provide PLR service to blocks of customers. The Company has provided comments on how each proposal could be implemented. Additional workshops and a proposed regulation are expected later in the year. Gas Restructuring ----------------- In order to comply with Nevada AB 366 for natural gas deregulation, the PUCN is developing new natural gas rules. The PUCN is following similar processes as in electric restructuring to develop new rules. To date the PUCN has developed a list of unbundled services and has issued a proposed rule for declaring services potentially competitive. This rule, which is expected to be adopted in the near future, will provide the process to be followed to declare services to be potentially competitive. In the third quarter 1998, the Company will begin the process of segregating costs into the unbundled services. The PUCN has also obtained comments, developed a proposed rule, and held workshops on licensing requirements for alternative sellers. CALIFORNIA As a result of the transition decision mentioned in the Company's Form 10-K for 1997, the Company filed three compliance filings with the CPUC in early 1998. 1) A filing reflecting proposed tariff changes to implement direct access; 2) a filing reflecting proposed unbundled rates; and 3) a proposal to implement three billing options and revenue cycle unbundling (metering, meter reading and billing) credits. In addition, the Company also filed on the same date a plan for compliance with the affiliate transaction rules. On June 24, 1998, the Company filed for approval to issue revenue reduction bonds, as provided for in AB 1890 (the bill restructuring California's electric services industry), to compensate the Company for the 10% rate reduction provided beginning January 1, 1998. The company is requesting approval to issue up to $ 25 million in revenue reduction bonds. On June 30, 1998, the Company requested an extension for California market valuation of generation assets. The Company requested an extension until July 1, 1999 (or, one year), to file its proposed mechanism for establishing the market value of its generation assets. The Transition Plan order had required the Company to file this proposal on July 1, 1998. On July 6, 1998 the CPUC granted a 90-day extension for California market valuation. FERC On May 22, 1998, the Company and several other parties filed a "Petition for Review" with the D.C. Court of Appeals requesting review of the FERC's decisions in the Pacific Gas Transmission (PGT) rate case. The FERC had previously denied the Company's protest of a settlement in PGT's last rate case and the Company's request for rehearing. 20 Updating the Company's original discussion in its 1997 Report on Form 10-K, on July 9, 1998, the Administrative Law Judge (ALJ) certified the settlement reached in the Import Limit Case (Dockets ER97-3593 and ER97-4462). The settlement resolves all issues in these cases and provides for a continuation of the current import limit allocation until the Alturas inter-tie is in service. At that time and until February 28, 2001, Tahoe Donner Public Utility District (TDPUD) will receive 30 MW of import capability. After 2/28/01, allocation of import capacity will be determined by the FERC based on the results of the Company's 1998 PUCN resource plan and a subsequent filing with FERC in 1999. The settlement now goes to the FERC for approval. TCID has contested the settlement; however, the ALJ certified the settlement since the opposition by TCID does not raise issues of material fact. ENVIRONMENTAL - ------------- On Tuesday, July 7, 1998, a phase shifter at the Company's Fort Churchill generation plant experienced an internal failure causing an oil spill of approximately 10,000 gallons. The Company is now conducting technical studies to determine remediation costs. However, the insurance policy covering the affected equipment provides for both the repair of the facility as well as any remediation costs. The policy deductible is $150,000 and as of June 30, 1998, the Company had not yet reserved this amount because the event occurred after June 30, 1998. MERGER - ------ As reported in Sierra Pacific Resources report on Form 8-K, the parent company of Sierra Pacific Power Company, dated July 7, 1998, SPR and Nevada Power filed a joint merger application with the Public Utilities Commission of Nevada for approval of a proposed merger. In the filing, Nevada Power and Sierra Pacific propose selling their generation plants if the merger is completed. Capital raised from the sale will be reinvested primarily in new transmission and distribution facilities. Through June 30, 1998, the Company had incurred a total of $4.8 in costs to effect the merger. $4.3 million of the external costs incurred have been capitalized and the balance of internal costs expensed during the period. 21 PART II - ------- ITEM 1. LEGAL PROCEEDINGS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits filed with this Form 10-Q. (15) Letter of independent accountants acknowledging awareness regarding interim financial information of the Company. (27) The Financial Data Schedule containing summary financial information extracted from the consolidated financial statements filed on Form 10-Q for the six month period ended June 30, 1998, for Sierra Pacific Power Company and is qualified in its entirety by reference to such financial statements. (b) Reports on Form 8-K 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Sierra Pacific Power Company --------------------------------- (Registrant) Date: August 13, 1998 By /s/ Mark A. Ruelle ------------------------ -------------------------------------- Mark A. Ruelle Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date: August 13, 1998 By /s/ Mary O. Simmons ------------------------ -------------------------------------- Mary O. Simmons Controller (Principal Accounting Officer) 23 EX-15 2 LETTER OF INDEPENDENT ACCOUNTANTS EXHIBIT 15 Sierra Pacific Power Company 6100 Neil Road Reno, Nevada 89511 We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Sierra Pacific Power Company and subsidiaries for the periods ended June 30, 1998 and 1997, as indicated in our report dated August 13, 1998; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, is incorporated by reference in Registration Statement No. 333-17041 on Form S-3. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. DELOITTE & TOUCHE LLP Reno, Nevada August 13, 1998 EX-27 3 FINANCIAL DATA SCHEDULE
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1998 JUN-30-1998 PER-BOOK 1,623,757 31,099 121,304 145,549 0 1,921,709 0 0 0 644,726 48,500 73,115 601,712 88,400 0 0 461 0 0 0 464,795 1,921,709 351,865 21,402 270,017 291,419 60,446 1,973 62,419 19,434 42,985 2,730 38,169 38,000 0 83,441 0 0 SIERRA PACIFIC POWER COMPANY IS A WHOLLY OWNED SUBSIDIARY OF SIERRA PACIFIC RESOURCES AND, AS SUCH, ITS COMMON STOCK IS NOT PUBLICLY TRADED. SPPC DOES NOT REPORT EPS INFORMATION.
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