Rate freeze may be dropped

Wednesday, April 7, 1999 | 12:16 p.m.

Sen. Randolph Townsend, R-Reno, committee chairman, scheduled discussion of the key issue for Friday.

Townsend asked State Consumer Advocate Fred Schmidt, Nevada Power Co. of Las Vegas and Sierra Pacific Power Co. of Reno to try to negotiate a compromise on rates and a possible freeze.

Schmidt and Harvey Whittemore, a lobbyist for the Nevada Resort Association, earlier persuaded Townsend to propose the five-year freeze. They said it would protect small businesses and residential customers from rate increases after the electric utility industry is deregulated next year.

Schmidt told the Senate committee Tuesday that a five-year freeze "was a tremendous protection for all of your constituents and all of the people I represent."

Michael Niggli, chief executive officer of Nevada Power, however, has said the bill put his company "in huge financial jeopardy."

At the meeting Tuesday, the committee revised the deregulation legislation, SB438, in several ways that were more acceptable to Nevada Power and Sierra.

Deregulation would be delayed until March 1, 2000. Dec. 31 was the deadline under the existing law.

Starting March 1, utility customers will be able to buy power from a competitor of former regulated electric power monopolies or continue relying on Nevada Power and Sierra Pacific.

The committee wants to repeal so-called deferred energy rate cases, which Nevada Power is allowed to file as often as every six months. Nevada Power uses deferred energy cases to seek rate increases or reductions to offset changes in the cost of fuel used for power generation and changes in the price of wholesale power.

Sierra Pacific's rates are frozen as part of a regulatory agreement that allows the utility to earn higher profits. Nevada Power's rates aren't capped and have increased by $80 million over the last 18 months through deferred energy cases, according to Schmidt.

The bill would repeal deferred energy cases starting Oct. 1, but it allows Nevada Power to file another energy rate case before that time.

After that date, Nevada Power could use another existing procedure to seek state approval of rate increases as frequently as monthly for fuel-related costs. The procedure wouldn't allow the company to recover past expenses.

Sen. Mike Schneider, D-Las Vegas, persuaded the Senate committee to require the two utilities to honor long-term contracts under which Nevada Power and Sierra buy power for resale.

The contracts, which continue for as long as 25 years, require the utilities to pay rates higher than those on wholesale markets today.