Utility deregulation powerful odyssey

Tuesday, July 15, 1997 | 8:39 a.m.

The Nevada legislation deregulating the electric utility industry doesn't read anything like a movie script, but it will give utility executives and workers, as well as regulators, all the excitement they want over the next few years.

The bill means that Nevada Power Co. and Sierra Pacific Power Co. must prepare for a competitive marketplace for the first time since 1911 when Nevada started regulating utilities.

AB366, the utility deregulation bill, also represents an adventure for consumers, who can look forward to choosing who they buy power from starting Oct. 1, 2001.

"I think we did the right thing," said Sen. Randolph Townsend, R-Reno, the Commerce and Labor Committee Chairman who helped write the legislation.

California and other states already have taken steps to introduce competition and "if we don't get prepared, all of the opportunities that are going to be afforded to everyone else in the world will be lost" in Nevada, he said.

The legislation will benefit both residential and large power customers, Townsend said, citing support from Consumer Advocate Fred Schmidt and Schmidt's predecessor, Jon Wellinghoff.

Residential and small business customers will be able to buy electricity from a variety of marketers who buy or generate power, but the state probably will continue to regulate the transmission and distribution of power.

"Transmission and distribution are expected to be a monopoly for a lot longer," Schmidt said. "It's just not efficient to build duplicative systems."

Under the legislation, the power companies will have to give competitors free and equal access to their power lines. If they continue to operate generating plants, they will be required to separate their distribution systems into an affiliated company, possibly a subsidiary.

These are the broad outlines of AB366. The Legislature left day-to-day decision-making about the form, timing and implementation of electric utility deregulation to the Public Utility Commission, Schmidt said.

Nevada Power supports the legislation, said Frank McRae, the utility's director of government affairs. But the company must wait to see how much of the so-called "stranded investments" the PUC will allow Nevada Power to recover from customers through rates.

Stranded investments are assets that are uneconomic in a deregulated environment, where customers no longer are forced to buy at regulated prices from a given utility. At Nevada Power, the most important stranded investments appear to be the long-term contracts it has for buying electricity from independent power producers, who built power plants specifically to generate electricity for the local utility.