Guinn warns deregulation won’t cut Nevada electricity costs

Monday, Aug. 28, 2000 | 10:55 a.m.

CARSON CITY -- Gov. Kenny Guinn plans to decide by the end of September when to open the electric market to competition, but he cautions that deregulation may not mean lower power rates.

Guinn has requested a progress report from the state Public Utilities Commission on whether Nevada will be ready for open competition. "If everything is not clear cut," he said, then deregulation could be delayed until the 2001 Legislature.

Sen. Joe Neal, D-North Las Vegas, has asked Guinn to postpone deregulation until the Legislature can take another look at it. He has asked for a bill stopping deregulation to be prepared for the Legislature to consider. He was one of two senators who voted against opening the market in the last session.

The 1999 Legislature authorized the governor to open the power market April 1. But Nevada was not ready, Guinn said.

The utilities commission has accepted an out-of-court settlement that set Nov. 1 for deregulation for big users, such as casinos, in Clark County. Other commercial customers would be free to seek alternate energy suppliers next year. Homeowners would have to wait until September 2001 before shopping for electricity.

Under the agreement, Nevada Power Co. is permitted to raise rates to recover the cost of fuel or purchased power. So far there have been three announced increases, totaling 7 percent, with the last one to go into effect at the end of September. Sierra Pacific Power Co., the Northern Nevada sister of Nevada Power, is expected to file its first rate increase request Sept. 15.

Asked about the rate increases hitting the consumer, Guinn said, "Deregulation doesn't set the price of fuel." Natural gas prices, he said, have risen more than 100 percent. And natural gas is used to fuel many power plants.

The increased use of energy and its limited supply have contributed to the rising prices.

"America has to start producing some power generation," he said. "We know it's not going to be nuclear.

"It's going to be plants that could be located in an area where it is relatively easy to get approval. You have got to have water for the cooling towers. You have got to have natural gas, because coal is too unpredictable."

Ely in eastern Nevada, he said, would love to have a generation plant. The area has water set aside, it's already in the power grid alignment and the environmental work has been done, he said.

Nevada could be a good location for clean-power generating plants. "There are a number of companies interested in coming to Nevada," he said. "But they want to see the regulations." He said Duke Power, one of the major electric companies in the nation, is interested.

"We know the shortage that is there today will continue to grow if you don't have these power generation stations under contract," the governor said last week. "If you can't produce the power, then supply and demand takes over. Demand is increasing rapidly and supply is not increasing -- What happens? Prices (rise)," he said.

Nevada, he suggested, could learn from mistakes in California. In San Diego after deregulation took over, rates skyrocketed.

Neal told Guinn in his Aug. 10 letter that deregulation won't work unless there is an adequate supply of power and non-discriminatory access to the transmission lines. "These conditions do not exist and will not for some time, if ever," Neal said.

"In a deregulated environment, the system is characterized by weak oversight, manipulation by generators and transmission line owners as well as exploitation of consumers," he said.

His bill to the 2001 Legislature will restore consumer protection that citizens formerly enjoyed, Neal said.