Guinn studying legislative intent on power deregulation issue

Thursday, Sept. 14, 2000 | 10:50 a.m.

CARSON CITY -- Gov. Kenny Guinn said Wednesday he will study the transcripts of hearings in the 1999 Legislature to learn if a so-called "global settlement" allowing periodic increases in electric rates is legal.

"I don't want to do something that violates the law," Guinn said after he met with Chairman Don Soderberg of the state Public Utilities Commission and some staff members.

The governor must decide whether to open the market to competition among electric companies starting Nov. 1 as called for in the agreement approved by the utilities commission on a 2-1 vote. A key part of the settlement allows Nevada Power Co. and Sierra Pacific Power Co. to boost rates every 45 days to recover higher costs of fuel and purchased power.

"It's a complex issue," said Guinn, a former president of Southwest Gas Corp. "I'm trying to teach myself."

Democratic legislative leaders Tuesday called on Guinn to delay deregulation until there are safeguards to protect consumers from rate increases, which they say could be as high as 64 percent by February 2003 in Southern Nevada.

Senate Minority Leader Dina Titus, D-Las Vegas, has advocated that the Public Utilities Commission review and give prior approval before either of the utilities can impose new rates.

The "global agreement", negotiated by the two utilities, state Consumer Advocate Tim Hay, the gaming industry of Southern Nevada and the staff of the utilities commission, allows these cost recovery rate increases to go into effect without any prior approval. An independent audit, to be paid by the utilities, is to be presented every six months to the commission to show the rates were justified.

The governor said Soderberg, in the Wednesday meeting, did not make any recommendation whether deregulation should go forward on Nov. 1. At that time, the big casinos and the water district in Las Vegas would be able to shop around for alternate suppliers and possible savings. The market opening for homeowners would not be until September 2001.

Guinn said he will talk to Soderberg and others again before making a decision. The 1999 Legislature allowed Guinn to open the market on March 1 this year but the governor said Nevada was not ready for the open competition then.

The governor said he wants to examine if a rate cap in the deregulation law applied to these cost recovery cases or ones where the company seeks to boost its profit level. Democratic leaders, including Titus, Assembly Majority Leader Richard Perkins, D-Henderson and Assistant Majority Leader Barbara Buckley, D-Las Vegas, maintain the 1999 law applied to all rate increases.

The three Democrats questioned whether a regulatory agency such as the PUC has the authority to disregard legislation approved by the Legislature.

The 1999 law allowed Nevada Power one more rate increase to recover back fuel costs before deregulation kicked in. The utility first asked for about a 5 percent increase and then boosted that to 15 percent. The application was denied by the utilities commission.

Suits were filed to force the state to approve the rate increase and to have the deregulation law declared invalid. But these were dropped when the "global settlement" was reached giving the two utilities the chance to impose higher rates without prior approval every time their fuel costs went up.

Soderberg appeared before the Legislative Interim Finance Committee Tuesday and some Democrats sought to force him to reveal what he would recommend to the governor. But Soderberg balked, saying he did not know what his suggestion would be.

Assemblywoman Chris Giunchigliani, D-Las Vegas, said the rate increases now going into effect -- 7 percent for customers of Nevada Power by Nov. 1 -- "flies in the face of the law."

That section of the law that imposed the rate cap may be unconstitutional, according to Brenda Erdoes, chief attorney for the Legislature. She said a court may find the law invalid because the rate freeze would force the two utilities to provide electricity at below cost. In this way, the utilities would not earn a reasonable rate of return.

Erdoes cited the U.S. Constitution, which says no private property shall be taken for public use, without just compensation.

Guinn said earlier he hoped to make the deregulation decision by the end of this month. The governor said the situation in California was discussed with Soderberg and his staff. But Nevada, he said, is in a different position than California. In San Diego, the first city to be totally deregulated, the rates jumped by more than 100 percent in several months.