SIERRA PACIFIC POWER CO
SEVERANCE AND RELEASE AGREEMENT, DATED MAY 18
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<TYPE>EX-10.(B)
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<FILENAME>b45693spexv10wxby.txt
<DESCRIPTION>SEVERANCE AND RELEASE AGREEMENT, DATED MAY 18
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                                                                   Exhibit 10(B)
                         SEVERANCE AND RELEASE AGREEMENT

PARTIES

      The parties to this Severance and Release Agreement ("Agreement") are
Sierra Pacific Resources and its affiliates, Nevada Power Company and Sierra
Pacific Power Company (collectively referred to as "Company"), and William E.
Peterson ("Employee").

RECITALS

      a.    Employee currently holds the positions of Senior Vice-President,
            General Counsel and Corporate Secretary with Company. This Agreement
            is not based upon any change in control or in the ownership of a
            substantial portion of the Company's assets.

      b.    Employee has had access to Confidential Information, as
            hereinafter defined.  Employee has occupied a position of trust
            and confidence with respect to such Confidential Information.

      c.    Employee and Company desire to terminate the employment relationship
            presently existing between them and to enter into an independent
            contractor attorney client relationship on terms and conditions as
            hereinafter set forth.

      d.    This Agreement provides Employee and Company with rights and
            benefits that exceed the rights and benefits contained in the
            existing Employment Agreement (as defined below) and is adequate
            consideration for this Agreement.

TERMS OF AGREEMENT

1.    DEFINED TERMS

      1.1   "Competing Organization" means persons or organizations, including
            Employee, engaged in, or who may become engaged in, research or
            development, production, distribution, marketing, providing or
            selling of a Competing Product or Service.

      1.2   "Competing Products or Services" means products, processes, or
            services of any person or organization, other than Company, in
            existence or under development, which are substantially the same as
            or which compete with the products, processes, or services being
            developed, manufactured, or sold by Company during the time of
            Employee's employment with Company, including, but not limited to,
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            products, processes and services related to the generation,
            transmission, or distribution of electric energy and/or the buying,
            selling, scheduling of electric energy or capacity, or any risk
            management activities associated therewith.

      1.3   "Restricted Area" means the State of Nevada and the service
            territories of the Company.

      1.4   "Confidential Information" means any plan, specification, pattern,
            procedure, profile, design, device, list, compilation, data, or
            information relating to the present or planned business of Company
            which has not been released publicly by authorized representatives
            of Company, or which is not common to industry practice, including,
            but not limited to trade secrets as defined in NRS 600A.010, et seq.
            Confidential Information may include inventions; marketing and sales
            plans or programs; customer and supplier information; financial
            data; purchasing, pricing, or supply information; product
            engineering information; technological know-how; designs, plans or
            specifications regarding products and materials; manufacturing
            processes and techniques; regulatory approval strategies; computer
            programs, data, formulae and compositions; service techniques and
            protocols; and new product strategies, plans and designs.
            Confidential Information also includes information that if
            disclosed, could negatively affect the Company's reputation and it's
            relationship with business, governmental agencies and customers.
            Confidential Information includes all information received by
            Company under an obligation of confidentiality to a third party.

      1.5   "Employment Agreement" means all previous agreements, express or
            implied, between Company and Employee, including change in control
            or letter agreements.

      1.6   "STIP" means short-term cash incentive payment.

      1.7   "SERP" means Supplemental Executive Retirement Plan.

2.    TERMINATION OF PRESENT EMPLOYMENT

      2.1   Employee agrees to forego retirement at the present time and remain
            with Company and discharge each and every of his present duties and
            responsibilities until such time as Company finds a replacement
            satisfactory to Company or February 1, 2003, whichever date occurs
            sooner ("Termination Date").

      2.2   Until the Termination Date, Employee shall receive the compensation
            and benefits to which he is presently entitled or may become
            entitled


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            without change or alteration. Any accrued and unused Paid Time Off
            will be included in Employee's final paycheck.

3.    SERVICES AS INDEPENDENT CONTRACTOR

      3.1   After the Termination Date, Company will retain Employee as outside
            counsel. Employee shall be entitled to compensation as follows:

            3.1.1 Employee shall perform legal and other services for Company as
                  directed by managerial level employees of Company for the
                  first twelve months following the Termination Date ("First
                  Twelve Month Period") in an amount not less than 1000 hours at
                  an hourly rate of $300.00 per hour (exclusive of actual
                  costs). This provision shall be subject to satisfactory and
                  timely performance by Employee within accepted standards of
                  professional practice.

            3.1.2 Employee shall perform legal and or other services for Company
                  as directed by managerial level employees of Company for the
                  twelve-month period following the First Twelve-Month Period
                  ("Second Twelve-Month Period") in an amount not less than 1000
                  hours at an hourly rate of $325.00 per hour (exclusive of
                  actual costs). This provision shall be subject to satisfactory
                  and timely performance by Employee within accepted standards
                  of professional practice.

            3.1.3 Employee shall perform legal and or other services for Company
                  as directed by managerial level employees of Company for the
                  twelve-month period following the Second Twelve-Month Period
                  ("Third Twelve-Month Period") in an amount not less than 1000
                  hours at an hourly rate of $350.00 per hour (exclusive of
                  actual costs). This provision shall be subject to satisfactory
                  and timely performance by Employee within accepted standards
                  of professional practice.

            3.1.4 Billings shall occur monthly and payment shall be made 30 days
                  after billing.

            3.1.5 Hours above 1000 hours for the First Twelve Month Period shall
                  not be credited against the 1000 minimum hours for the Second
                  or Third Twelve-Month Periods and hours above the minimum for
                  the Second Twelve-Month Period shall not be credited against
                  the 1,000 minimum hours for the Third Twelve-Month Period.
                  Should the minimum hours not be billed after the First
                  Twelve-Month Period or the Second Twelve-Month Period or the
                  Third Twelve-Month Period, then Employee shall remit a bill
                  for the full amount of any deficiency in the first month
                  following


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                  the end of the First and Second or Third Twelve-Month Periods,
                  respectively.

4.    BENEFITS TO EMPLOYEE

      Commencing on the Termination Date, Employee shall be entitled to the
following benefits:

      4.1   Employee shall be entitled to whatever qualified pension benefits
            Employee may be entitled under the terms and conditions of the
            existing qualified retirement plan without change, modification or
            enhancement.

      4.2   Employee shall be entitled to withdraw in a lump sum and be paid
            within 30 days of the Termination Date all nonqualified retirement
            benefits to which he may be entitled calculated in accordance with
            the existing terms and conditions of said unqualified plans but
            altered, changed and or modified so as to treat Employee for
            purposes of said calculations as though Employee were 62 years of
            age on the day prior to the Termination Date and as though Employee
            had completed 10 years of actual service with respect to all such
            plans and also with respect to his existing Employment Contract
            which provides Employee with one and one half year of service credit
            for each year of actual service performed for the first ten years of
            service.

      4.3   Employee shall be entitled to whatever health and welfare benefits,
            including, but not limited to, medical, prescriptive drugs, dental,
            vision and EAP benefits, are available to retirees at Employee's age
            and their dependents, and on the same terms and conditions except
            that such benefits shall be calculated and made available without
            any actuarial deduction or other penalty resulting from having
            retired before age 65 or age 62, and, in addition, had completed ten
            years of actual service with respect to all of such plans as well as
            with respect to the extra credit earned under his existing
            Employment Contract which gives Employee one and one-half year of
            service for each year of service performed for the first ten years
            of employment.

      4.4   If ever in the future any of the Company's existing, retired, or
            separated officers are paid a STIP for the year 2000 ("2000 STIP")
            then the Employee shall be paid the 2000 STIP at the same time and
            in the form and manner paid to the other officer recipient(s). The
            2000 STIP shall be subject to withholding, deductions, assessments,
            and taxes, if applicable. If ever any of the Company's existing,
            retired or separated officers are paid a STIP for the year 2001
            ("2001 STIP"), then the Employee shall be paid the 2001 STIP at the
            same time and in the


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            form and manner paid to the other officer recipients(s). The 2001
            STIP shall be subject to withholding, deductions, assessments, and
            taxes, if applicable. If ever any of the Company's existing, retired
            or separated officers are paid a STIP for the year 2002 ("2002
            STIP"), then the Employee shall be paid a prorated portion of the
            2002 STIP at the same time and in the form and manner paid to the
            other officer recipient(s). Employee's prorated portion of the 2002
            STIP shall be calculated by dividing the actual number of hours
            worked by Employee during 2002 (1/1/02 through Termination Date) by
            2080, and Employee shall be entitled to receive the resulting
            percentage of the 2002 STIP. The 2002 STIP shall be subject to
            withholding, deductions, assessments, and taxes, if applicable.

      4.5   Employee shall be entitled to withdraw all accumulated deferred
            compensation under the terms and conditions of the existing deferred
            compensation plan except that, on the Termination Date, Company
            agrees that Employee shall be deemed and considered a terminated
            employee and shall have the right to withdraw such compensation.

      4.6   Employee is covered under Supplemental Executive Life insurance.
            Employee shall continue to be covered under such insurance until
            July 31, 2003, with all premiums paid by Company until July 31,
            2003, at which time Employee shall have the option of converting
            such insurance in strict accordance with the terms of such policy
            and paying any and all premiums due thereon as required by any SERP,
            restoration, life insurance, or other plan maintained by Company as
            though employee had completed 10 years of service under his
            Employment Contract at age 55.

5.    CONFIDENTIALITY

      5.1   Employee shall preserve as confidential all Confidential
            Information. Employee shall not use Confidential Information for the
            benefit of Employee or any third party. Employee shall not disclose
            to others any Confidential Information or any copy or notes made
            from any Item embodying Confidential Information. If Employee is
            required to disclose Confidential Information pursuant to a valid
            order of a court or other governmental entity or any political
            subdivision thereof; then Employee shall first give notice to
            Company so that Company shall have a reasonable opportunity to
            interpose an objection or obtain a protective order requiring that
            the Confidential Information and/or documents so disclosed be used
            only for the purposes for which the order was issued. The
            confidentiality provisions herein shall expire 36 months from the
            date of this agreement.


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6.    NON-COMPETITION

      6.1   Without express consent of the Company's CEO for a period of one
            year after Employee's Termination Date or last serving as outside
            counsel under the terms and provisions of this Agreement and as
            otherwise governed by applicable rules of professional conduct,
            Employee shall not, directly or indirectly, assist, provide services
            or consultation to, enter into, engage in or acquire any ownership
            interest in, or become employed by or associated with, any Competing
            Organization doing business or seeking to commence doing business in
            the Restricted Area. This includes, but is not limited to, services
            rendered to such Competing Organization in an executive, managerial,
            administrative, legal or consulting capacity in connection with
            Competing Products or Services in support of actual competition in
            geographic areas other than where the services are performed and
            thus may fall within the prohibition of the Agreement, regardless of
            where such services physically are rendered. This limitation
            includes, but is not limited to, any contact or solicitation, either
            for Employee's benefit or for the benefit of any other person or
            entity, and Employee will not in any manner assist any person or
            entity in making any such contact or solicitation.

      6.2   Employee shall not solicit any employee of Company to terminate his
            or her employment or relationship with Company or to perform any
            service for employee or for any Competing Organization.

      6.3   Employee agrees that the restrictions set forth in paragraphs 6.1
            and are fair and reasonable and are reasonably required for the
            protection of the interests of the Company and compliance with those
            provisions will not cause Employee undue hardship nor unreasonably
            interfere with Employee's ability to earn a livelihood.

7.    RELEASE

      7.1   Except for rights and benefits under any existing or future
            insurance policy of Company and/or Employee and rights of
            indemnification under any such policies or rights of indemnification
            under the articles or by-laws of Company or under statutory or
            common law, or under any agreement, and/or any claims for benefits
            reserved under this Agreement or claims arising under any breach of
            this Agreement, all of which are expressly reserved, Employee hereby
            waives and releases Company and its officers, directors, agents, and
            employees (collectively referred to as "Company Agents") from any
            claims, rights, contracts or causes of action existing or accrued as
            of the effective date of this Agreement that Employee may have
            against Company or Company Agents (collectively referred to as
            "Claims") which arise out


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            of or are related to Employee's employment with Company
            (collectively referred to as "Release") or the termination of the
            Employment Agreement. This Release includes, but is not limited to,
            the following:

            7.1.1 Claims which are known or unknown as of the effective date
                  of this Agreement;

            7.1.2 Claims which arise under any state or federal laws, including,
                  but not limited to, the Civil Rights Act of 1964, as amended,
                  and the Age Discrimination in Employment Act of 1967, as
                  amended, which have arisen on or before the effective date of
                  this Agreement; and

            7.1.3 Claims based upon any contract of employment, including but
                  not limited to, the Change in Control Agreement, except as set
                  forth herein.

      7.2   Employee shall not commence any action against Company or Company
            Agents in violation of this Release.

      7.3   Employee does not waive any Claim which arises after the effective
            date of this Agreement.

      7.4   Employee further expressly acknowledges and agrees that:

            7.4.1 Employee has been advised to consult with an attorney
                  before signing this Agreement;

            7.4.2 This Agreement is being offered only to Employee at this
                  time.

            7.4.3 Employee was given a copy of the Agreement on or about August
                  __, 2002. Employee was informed that Employee had 21 days
                  within which to consider the Agreement. If Employee fails to
                  execute this Agreement within said 21-day period, then the
                  terms and conditions contained in this Agreement are
                  automatically withdrawn without further action or notice by
                  Company.

            7.4.4 Employee was informed and understands that Employee has seven
                  days following the date Employee executes this Agreement in
                  which to revoke this Agreement. Any revocation of the
                  Agreement must be in writing and delivered to the Vice
                  President of Human Resources of Company during the revocation
                  period. This Agreement will become effective and enforceable
                  seven days following execution by Employee, unless it is
                  revoked during the seven-day period.


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8.    MISCELLANEOUS PROVISIONS

      8.1.  Confidentiality of Agreement: Unless and until the terms of this
            Agreement, and the amount of any payment eligible to be paid or
            actually paid under this Agreement, are disclosed in writing to the
            public by Company pursuant to any applicable legal duty to disclose
            such information, it shall be a condition of eligibility to receive
            or retain any payment pursuant to this Agreement that Employee hold
            the terms of this Agreement and the amount of any payment hereunder
            in strict confidence. Employee may disclose such information on a
            confidential basis to Employee's family and to any financial
            counselor, tax advisor or legal counsel retained by Employee.

      8.2   Assignment by Company: The obligations of Company hereunder shall be
            the obligations of any and all successors and assigns of Company.
            Company may assign this Agreement without Employee's consent to any
            affiliate or subsidiary of Company, provided that such assignment
            does not relieve the Company's obligations hereunder. Company may
            assign this Agreement without Employee's consent to any company that
            acquires all or substantially all of the stock or assets of Company,
            or into which or with which Company is merged or consolidated. The
            Employee may not assign the Agreement, and no person other than
            Employee or Employee's estate may enforce the rights of Employee
            under this Agreement.

      8.3   Waiver: The waiver by Employee or Company of a violation or breach
            respectively by Company or by Employee of any provision of this
            Agreement shall not be construed as a waiver of any subsequent
            violation or breach.

      8.4   Severability: The provisions of this Agreement shall be severable,
            and in the event that any portion or provision of it is found by any
            court to be unenforceable, in whole or in part, the remainder of
            this Agreement shall nevertheless be enforceable and binding on the
            parties. In the event that any restriction set forth in this
            Agreement shall be declared by a court of competent jurisdiction to
            exceed the maximum restriction such court deems reasonable and
            enforceable, the restriction deemed reasonable and enforceable by
            the court shall become and thereafter be the maximum restriction
            hereunder.

      8.5   Review of Agreement: Employee acknowledges that Employee had
            sufficient opportunity to review this Agreement with an attorney or,
            if Employee did not do so, it is because Employee read and
            understood this Agreement and did not believe that legal advice was
            necessary.


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            Employee agrees that any restrictions contained in this Agreement
            are fair and appropriate under the circumstances.

      8.6   Dispute Resolution: Any dispute between the parties which is covered
            by, arises out of, or is based upon this Agreement shall be settled
            by final and binding arbitration. Any award or determination
            rendered by the arbitrator may be entered as a judgment in any court
            having jurisdiction thereof. The arbitration is subject to the
            following:

            8.6.1 The arbitration shall be administered by the American
                  Arbitration Association ("AAA") in accordance with its
                  Employment Dispute Resolution Rules ("Rules") in effect at the
                  time of the arbitration.

            8.6.2 The arbitration shall be heard by one neutral arbitrator. The
                  arbitrator shall be an attorney admitted to the practice of
                  law in at least one state.

            8.6.3 The arbitrator shall have the authority to award any remedy or
                  relief that a state or federal court having jurisdiction over
                  the persons and subject matter is authorized to grant.

            8.6.4 The Company shall pay all of the costs and/or fees charged by
                  AAA and the arbitrator. The arbitrator shall have the
                  authority to award attorney's fees and costs pursuant to
                  sub-section 8.6.3 above.

      8.7   Jurisdiction: This Agreement shall be construed under the laws of
            the State of Nevada except where Federal laws are applicable. Venue
            for any arbitration or action to enforce the arbitration provisions
            of this Agreement shall be in the State of Nevada.

      8.8   Effective Date: This Agreement will become effective and enforceable
            seven days following execution by Employee, unless it is revoked
            during the seven-day period in accordance with the provisions of
            7.4.4 above.

      8.9   Final Agreement: This Agreement supercedes all prior understandings,
            statements or agreements concerning the subject matter of this
            Agreement, including the Employment Agreement or Change in Control
            Agreement. Any amendment to this Agreement shall be in writing and
            signed by both parties. This Agreement contains all of the terms and
            conditions agreed upon by the parties. There are no understandings
            or agreements which conflict or modify the terms of this Agreement.
            Company has made no representations or promises upon which Employee
            relies in signing this Agreement except the


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            terms set forth herein. Company has made no representations upon
            which Employee relies concerning the tax characteristics or status
            of the benefits described in this Agreement.

      8.10  Cooperation. Company and Employee agree to cooperate fully and
            execute any and all supplementary documents and to take all
            additional actions which may be necessary or appropriate to give
            full force and effect to the terms and intent of this Agreement

      8.11  Binding Obligation. Company represents and warrants to Employee that
            Company has taken all requisite corporate action to approve this
            Agreement and that this Agreement constitutes a valid, binding and
            enforceable obligation of the Company.

COMPANY                                   WILLIAM E. PETERSON



By:___________________________            _____________________________

Date:  September ____, 2002               Date:  September  ____, 2002


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