PUC votes to postpone deregulation

Sunday, Jan. 31, 1999 | 9:21 a.m.

The decision Friday came the same day the PUC signed an order clarifying its earlier approval of Nevada Power Co. and Sierra Pacific Resources' merger plans.

Nevada Power and Sierra Friday called the clarification a "green light" for their planned $2.5 billion merger.

"We've now completed the most important step on the road to merging our two companies," said Michael Niggli, Nevada Power president.

The companies "thank the commissioners for their vision in helping us create a company that will increase efficiencies, provide price stability and jump start competition in the state," Niggli added.

Deregulation was scheduled to open the door for electric company competition in Nevada by Dec. 31. But PUC Chairwoman Judy Sheldrew said she wanted to drop that deadline - and wasn't ready to suggest a new deadline.

Sheldrew mentioned several reasons to postpone state deregulation, including needing to get approval from the Federal Energy Regulatory Commission, potential Year 2000 computer problems and uncertainty about when Arizona will deregulate electric utilities.

In a separate matter, the PUC also voted to give the state's two largest electric public utilities the opportunity to keep profits from the sale of their power plants. The commission discussed the matter the previous day but didn't vote until Friday.

The PUC is allowing Nevada Power and Sierra Pacific to recover goodwill related to the sale of the power plants.

Goodwill is the amount by which the sale price of plants exceeds the value shown in company books for the plants. Goodwill is an intangible asset of an ongoing business, which generally exceeds the value of liquidating assets.

Goodwill often represents the value of a company name, good customer relations and employee morale, according to a financial dictionary published by Barron's.

The PUC intends to use the goodwill gains to offset losses anticipated from long-term contracts for purchasing power.

Nevada Power and Sierra Pacific are committed to long-term contracts that specify wholesale power prices that are higher than electric power prices on the market. The utilities expect they will lose money when they pay these higher rates, and the PUC wants to recover those losses through goodwill gains, including those related to power plant sales.

Under the clarification, the companies may keep some goodwill profits if they exceed the costs of the long-term, wholesale power contracts.