Nevada Power Co.

Overview Key strengths Key risks The company is a regulated, vertically integrated electric utility that provides an essential service to Las Vegas and surrounding areas. A lack of regulatory diversity makes the company dependent on the Public Utilities Commission of Nevada (PUCN) to sustain its credit quality. It manages its regulatory risk effectively under a generally constructive regulatory environment. Politicization of utility policies in Nevada are heightened. Group support from parent Berkshire Hathaway Energy (BHE) provides three notches of uplift to the rating. The company?s exposure to commercial and industrial customers, particularly in the gaming and mining industries, leaves it more susceptible to adverse economic conditions than many of its peers. Negative discretionary cash flow indicates future external funding needs.

...Our assessment of Nevada Power Co. (NPC) as a core subsidiary of BHE underpins the rating. Because the company is a core subsidiary of BHE, its issuer credit rating is aligned with BHE's group credit profile. BHE announced the merger of operating subsidiaries NPC and Sierra Pacific Power (SPPC). In March 2022, the Nevada utilities filed a joint application with the PUCN for authorization to merge SPPC into NPC, surviving as one entity under NPC. The new combined entity will serve approximately 1.4 million electric customers and 200,000 natural gas customers in Nevada, including Las Vegas and Reno. Upon merger approval, which we anticipate in the first half of 2023, we will review our stand-alone credit profile on the newly combined company. We expect NPC to effectively manage its regulatory risk, bolstering its business risk profile. Although the company depends on the PUCN to sustain its operating cash flows, it benefits from various constructive mechanisms to mitigate regulatory lag,...

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