Review of Power Procurement and Risk Management

Nevada Public Utilities Commission Staff
Completed May 2002

Synapse reviewed the power procurement and risk management practices of Nevada Power Company and Sierra Pacific Power Company in the western markets for a test year that included the summer of 2001. The results of this review were presented in the testimony of Bruce Biewald (PUCN Dockets 01-11029 and 02-2002) and Paul Peterson (PUCN Docket 01-11029). Synapse concluded (a) that the Companies relied too much upon standard products (e.g., 6x16 purchase blocks), (b) that the Companies overlooked or discounted indications that market forces or regulatory actions would address high summer prices in the western markets prior to the summer of 2001, and (c) that specific forward purchases made in early 2001 had costs in excess value of $225 million (NPC) and $38 million (SPPC). Project completed in May 2002.