Competition in electric industry may be delayed

Wednesday, Dec. 29, 1999 | 11:08 a.m.

CARSON CITY -- Nevada's entry into the new era of competition in the electric industry may be delayed because of a myriad of unresolved problems.

The 1999 law gives Gov. Kenny Guinn the authority to declare the market open on March 1. That's when consumers are scheduled to be able to choose their electricity supplier, ending the monopolies of Nevada Power Co. in Las Vegas and Sierra Pacific Power Co. in Reno.

But it's iffy if the state Public Utilities Commission, the two major power companies and the other players can reach agreement on the outstanding issues by that time.

Fred Schmidt, director of the State Bureau of Consumer Affairs, says the March 1 date "is up in the air. A number of things need to be resolved by February or there needs to be more time."

Scott Scherer, chief of staff for Guinn, said some of the disagreements "are going to have to be decided fairly quickly. The governor has the ability to waive the date. And we would have to figure how much more time they need." He said the governor is "still pushing for March 1."

Missing the starting date suggested by the Legislature probably won't mean much to the average homeowner. There are only a handful of companies that have filed applications to compete with Nevada Power and Sierra Pacific. And most of those are targeting commercial or big users.

But some major industrial or gaming companies would like to see competition arrive as soon as possible to allow them the opportunity to shop for cheaper power.

Don Soderberg, chairman of the utilities commission, said the timetable "is fluid. It's one of those things that more time depends on consensus being reached rather than this agency acting quickly and decisively."

The commission will meet today to look at an agreement between the two major utilities, the staff of the utilities commission and Schmidt's office on setting the timetable and procedure for selling off the generating plants.

"Divesting the units (the generating plants) is one of the important steps in creating a competitive market," he said.

Nevada Power and Sierra Pacific decided that as part of their merger, they would sell off their power plants. Putting these units on the market will help reveal how much they are worth.

Schmidt said he hopes the sales can be completed by the end of the year.

Still up in the air is the request by Nevada Power for a $110 million rate increase for Clark County customers. Former Commissioner Michael Pitlock was presiding over that case. But he was not reappointed by the governor. So Soderberg has taken the case and has granted a delay in a hearing.

That case will be heated. Schmidt said, "We will not agree to any significant rate hike in Southern Nevada. We will go to the mat."

That must be decided before open competition arrives. At present, except for that case, all electric rates are frozen until March 2003.

Soderberg says the issue "of critical importance is the unbundling cases. These are very acrimonious to say the least. The unbundled rates are the foundation of what everybody does."

The unbundling issue is over setting the rates Nevada Power and Sierra Pacific Power will charge outside companies that want to use their distribution system for supplying electricity to customers.

Soderberg is worried any decision by the commission can be appealed to the courts. "I'm worried we are looking at a big court battle between one side or another. Without consensus, this could be a legal nightmare."

It would probably be easy, he said for a company to get a restraining order to hold the system in abeyance until the suit is decided.

Schmidt says, "If there is a lawsuit, everything is delayed a year." Reaching a stipulation is important, he said, "so we can move forward. If we end up litigating, nothing is going to happen on competition."

There must be agreement on choosing an independent operator to administer the flow of power through the system. This company or individual acts as a traffic cop in directing the power to its ultimate destination.

And the Federal Energy Regulatory Commission (FERC) must approve the decision on the independent operator. It could take up to 60 days to get this approval, setting back the March 1 date.

Soderberg said the federal commission issued a rule that it would like to see a regional transmission organization run the power system rather than a local solution. If Nevada develops a system, federal approval could come within two months or it might takes six to eight months if there is controversy.

But there could be an interim solution, Soderberg said, clearing the way for competition.

Another potential roadblock is the three-member utilities commission structure. Soderberg and Commissioner Judy Sheldrew have deadlocked on issues in the past. Gov. Guinn's new appointee Richard McIntire formerly served as director of regulatory operations at the commission. And prior to that he was with the Bureau of Consumer Protection.

He may have to abstain on votes, leaving a 1-1 deadlock. Schmidt says if that occurs, "Hopefully the governor will appoint a temporary commissioner."

Soderberg is still hopeful the starting date can be reached. "All of the tasks can be completed before March 1. The wild card is FERC (federal) approval and avoiding litigation in the unbundling cases."