Thursday, Oct. 5, 2000 | 11:16 a.m.
Deregulation of the electric industry was supposed to help Nevada customers, from huge casinos to single-family homes, reap the benefits of a competitive electricity market.
But deregulation now, Gov. Kenny Guinn believes, could be disastrous, with the West in the throes of what he called "an energy crisis." Deregulating now, Guinn said, could cause power rates in Nevada to skyrocket, particularly for residential users.
"I am not going to do anything that would shift that burden (of high electric rates) to the families and businesses of Nevada," Guinn said. "I don't believe this is a time to raise the issue of deregulation with increasing demand and no new supply. You know what's going to happen."
As a result, Guinn said Wednesday that he will not open Nevada's electric market on Nov. 1. The governor set a new deadline of Sept. 1 -- 18 months after the initial date contemplated in the 1999 deregulation bill.
In the meantime Guinn said he would establish a bipartisan panel of legislators, power company officials, business people and residential customers. The "Nevada Energy Policy Committee" will be responsible for presenting a long-term plan to ease Nevada's power shortage situation by Jan. 15.
Guinn press secretary Jack Finn said the recommendations of this committee could be implemented directly by the governor without legislative action.
The decision was something of a blow to large casino operators, who would have been the first customers permitted to shop for an electric supplier on Nov. 1. Residential customers, by comparison, would have had to wait as long as Dec. 31, 2001.
But a Reno lawyer and lobbyist who has represented big Las Vegas casinos in the deregulation debate said there wouldn't have been much advantage for casinos in shopping the open market as of Nov. 1.
"In today's environment, the advantage of going into the market is removed," said Harvey Whittemore. "This (the delay) is not a surprise to anyone. I'm glad the governor is committed to deregulation in the long term, and we will work those details out."
Nevada Power Co.'s parent company, Sierra Pacific Resources of Reno, which will lose its monopoly on the Nevada electric industry when competition begins, supported Guinn's decision.
"We continue to believe that competition is good for customers, and that real competition, which exists when there's an adequate supply for customer needs, is good for customers," said Sierra Pacific Chief Executive Walter Higgins. "We understand why, in the face of what's going on, we need to delay the start of competition a little bit.
"We need an energy policy that makes sure there's enough product people want to ensure competition."
One thing the governor will ask the Public Utilities Commission to change is the staggered introduction of deregulation by customer class, a system he called unfair to smaller customers. Under that schedule, large gaming companies would have been allowed to shop for electricity as of Nov. 1, but residential customers might have had to wait as much as a year longer.
"If we're going to let a big customer out, we should let a single-family home out at the same time," Guinn said. "It is my goal to make deregulation work for everyone, not just a select few."
Deregulation refers to the introduction of competition in the business of generating electricity, a monopoly now held in Las Vegas by Nevada Power. The transmission and distribution of electricity through power lines will remain a regulated monopoly, though rates for these services under deregulation have yet to be set.
The problem with deregulating generation now is that there's a chronic shortage of power and not enough electric generation capacity has been added to the Nevada market in recent years. The imbalance of new supply to growing demand has caused power rates to soar across the West.
To solve that problem, Guinn said Nevada needs a strategy that will transform Nevada into a "mecca" of power plants. By streamlining the approval process for new plants -- and offering generators possible tax incentives -- Guinn believes generation companies will pour in to build new plants serving both Nevada and California.
In exchange for the incentives, Guinn said, Nevada customers should be given the right of first refusal to buy a certain amount of power produced at the plants, so that generators wouldn't simply cut off Nevada and ship all of their generated electricity to higher-rate markets. Such a strategy, Guinn believes, would help ease Nevada's supply shortage, and could create new construction and power plant jobs.
To help ease demand, Guinn said Nevada needs to examine ways of promoting the conservation of energy by Nevada's power users. One way to do that, he suggested, is to provide incentives to power companies to implement conservation plans. Guinn will also move forward with conservation steps at government buildings across the state.
But Nevada ratepayers also won't be getting any relief from Nevada Power's monthly rate hikes, approved under a settlement between Nevada Power and state regulators in July. Nevada Power has already raised rates more than 7 percent in an effort to make up losses caused by the rising cost of generating and buying electricity.
Guinn said he believes these increases should be allowed to continue, so long as Nevada Power was simply passing through higher fuel costs to customers. But he also said he would order the Public Utilities Commission to review these rate hikes within days of their proposal, rather than months, and release the findings to the public.
"There is no perfect agreement," Guinn said. "You have to protect the interests of the people ... but it's in their interest that the only power company in the state (Sierra Pacific Resources) does not end up in bankruptcy."
Though Guinn indicated he believed the rate hikes were appropriate, he will ask the energy panel to review the terms of the Nevada Power settlement. And legislators will review the settlement as well as other deregulation issues when the Legislature convenes in Carson City next year.
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