Nevada Power hearing canceled, settlement talks under way

Tuesday, July 11, 2000 | 10:49 a.m.

CARSON CITY -- An out-of-court settlement may be near to resolving Nevada Power Co.'s $120 million rate dispute with the state and to clear the obstacles that have stopped deregulation of the Nevada electric industry.

A preliminary agreement calls for a 6.5 percent rate hike for Nevada Power residential customers and an 8 percent boost for big commercial users over a 30-month period. This would reimburse the Las Vegas utility for past higher-than-expected fuel costs. Officials wouldn't immediately say how much revenue this would generate for the utility.

And there would be a phase-in of deregulation starting with big customers this November and homeowners in September 2001, sources say.

The parties in the negotiation have kept a tight lid on details of any settlement and last-minute changes are possible.

Sources close to the case, who asked not to be identified, also said Nevada Power would be permitted to adjust rates up or down based on the cost of fuel.

State Consumer Advocate Tim Hay said Monday, "We're close to a negotiated settlement that we can reasonably accept."

His statement came after a court hearing was postponed on the lawsuit filed by Nevada Power to overturn the March decision of the state Public Utilities Commission that denied the more than 12 percent, $110.7 million rate hike sought by the Las Vegas utility.

Instead of increasing rates, regulators lowered them by $9 million, angering the utility and contributing to a decline in its stock price and financial outlook as its hoped-for revenue was cut $120 million.

"Discussions were initiated in early June between the company, the office of consumer advocate and the (State Public Utilities) commission staff," said Hay. "They were derivative of the governor's summit (on electric issues) but totally separate." He declined to release any details.

District Judge Mike Griffin delayed the scheduled Monday court hearing until Thursday. Hay said, "By Thursday, either a final deal will be reached or likely a deal will not be consummated."

Bill Peterson, attorney for Sierra Pacific Resources, the parent company of Nevada Power, said, "The parties are trying to reach a settlement. The details need to be worked out.

"Everybody has worked hard and we're coming closer," said Peterson, who did not identify what may be in the settlement.

Any negotiated settlement would have to be approved by the Public Utilities Commission. But this could represent a major breakthrough in the efforts to bring electric deregulation to Nevada.

The sources close to the case said settlement may involve a federal lawsuit by Sierra Pacific Resources challenging the constitutionality of the 1999 open competition law. The sources say an agreement was near last week, then unwound and is now being put back together.

According to a preliminary schedule, deregulation would come to the big users such as the major casinos on Nov. 1 this year; industrial users on April 1 next year; large and small commercial users on June 1, 2001, and residential customers between September and December 2001.

Sources said the Las Vegas Valley Water District and big Las Vegas casinos, which have opposed the rate hike, needed to sign off on the settlement by Thursday's court hearing.

One other concern is that lawmakers may be asked to scrap deregulation next year as some legislators feel it will hurt residential consumers.

Sen. Randolph Townsend, R-Reno, one of the major drafters of the deregulation law, said he hoped the agreement will clear away all the court cases.

"The governor and I have encouraged the parties to keep their lines of communication open," he said.

He said he and Gov. Kenny Guinn talked with representatives from all sides at a dinner last Friday for the University of Nevada, Reno athletic teams at the governor's mansion. Townsend said the parties worked through the weekend.

Townsend said a drawn-out suit doesn't benefit the utilities or the consumers -- only lawyers.

Nevada Power and Sierra Pacific Power Co. of Reno may be more willing to negotiate because of the recent "spike" in rates the utilities pay for buying energy on the open market. The limit on available power nationally, the heat wave across the country and the growth in the West have combined to drive energy prices up.

Guinn decided that the state and the utilities were not ready for the opening of competition on March 1. He delayed it to an unspecified date but called a "summit" to get the parties to negotiate.