Nevada Power Co.

The stable outlook on NPC reflects our outlook on its ultimate parent, Berkshire Hathaway Energy Co. (BHE). The stable outlook on BHE over the next 24 months reflects S&P Global Ratings' 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 its credit measures to strengthen modestly, supporting the rating. Under our base-case forecast, we expect adjusted funds from operations (FFO) to debt to average about 14%-16.5% over the next few years. We could lower the ratings if BHE's core financial measures continuously underperform our base-case forecast and remain consistently at less credit-supportive

...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 certain construction work in progress for seven months 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 purchases about 30% of power from both renewable and nonrenewable sources. The high degree of purchased power requires maintaining strong rate recovery through the fuel cost recovery rider. Regulatory independence has weakened in Nevada. Regulatory independence and insulation have weakened because Nevada's market framework and energy policies might be less supportive of long-term financing of utilities. The heightened politicization...

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