Nevada Power Co.

The stable outlook on NPC reflects S&P Global Ratings' outlook on its ultimate parent, Berkshire Hathaway Energy Co. (BHE). The stable outlook on BHE over the next 24 months reflects our expectation that management will continue to focus on its core utility operations and reach constructive regulatory outcomes supporting the existing business risk profile. Although BHE has used significant debt leverage for acquisitions and capital investments, we expect credit measures to strengthen modestly, supporting the current rating. Under our base-case forecast, we expect adjusted funds from operations (FFO) to debt to average about 14%-15% over the next few years. We could lower ratings if core financial measures continuously underperformed our base-case forecast and remained consistently at less credit-supportive levels, including

...Regulatory lag is reduced through various mechanisms. Regulatory lag is reduced because Nevada Power Co. (NPC) is permitted to use a hybrid test period, reflecting known and measurable adjustments for construction work in progress for certain resources for a seven-month period after the initial test period. The regulatory commission also allows for credit-supportive cost recovery mechanisms, such as revenue decoupling, fuel cost recovery riders, infrastructure replacement mechanisms, and energy efficiency-related recoveries. The company uses a high percentage of purchased power. The company uses purchased power to supply generation needs. Roughly 30% of generation is from power purchase agreements, including renewable and non-renewable energy. The high degree of purchased power requires maintaining strong recovery mechanisms like the fuel cost recovery rider Regulatory independence has weakened in Nevada. Regulatory independence and insulation have weakened because Nevada's market framework...

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