In the long run, deregulation still advocated by experts

Thursday, April 5, 2001 | 11:33 a.m.

While lawmakers are debating legislation that would put the brakes on the deregulation of the electrical industry in Nevada, experts still say deregulation is the best way to reduce utility prices.

Nevada Consumer Advocate Tim Hay, Nevada Power Co. President Steve Rigazio and and Sue Mara, director of government affairs for Enron Corp., Houston, agreed that having a deregulated market is the best way to keep energy prices down.

Addressing a Las Vegas Chamber of Commerce leadership forum last week, the three also agreed that during the current energy market, when electricity demand exceeds supply, now is not the time to start deregulation.

Panelists also universally criticized California's handling of its energy market and said that state's efforts at deregulation were flawed by government-imposed price caps that prevented utilities from recovering their costs.

Nevada's biggest energy users have been advocates of deregulation because they want to negotiate directly with independent power producers to cut their electricity bills. But some experts are leery about allowing casino companies and mines to negotiate their own deals because they fear residential users will be stuck with higher bills as a result.

"I hate to point fingers, but a lack of leadership in California is what led to their problems," Rigazio said.

He praised the Nevada Legislature "for taking a time out" to assess why California's deregulation plan failed and Gov. Kenny Guinn for not implementing deregulation in the state on two occasions, even though he had the legislative authority to do so.

"Everybody understands what happened in California, except their governor and the Legislature," said Mara, who is based in San Francisco.

Nevada lawmakers and regulators already are on course toward attempting to fix the state's energy market. In separate bills, legislators are considering proposals prohibiting the sale of power plants by Nevada Power's parent company, Sierra Pacific Resources Inc.; allowing deferred accounting on fuel and purchased power, a system used when utilities are regulated; and encouraging development of alternative energy sources.

The bill prohibiting the power plant sales through July 1, 2003, also strikes previously approved deregulation measures. Sierra Pacific and Nevada Power were ordered to sell their power plants as a condition of their 1999 merger.

Nevada's energy debates are going on at the same time California's Public Utilities Commission approved rate increases of up to 46 percent -- increases commissioners say will not only stabilize two financially troubled California utilities but also will encourage conservation.

Hay said in an interview following the panel discussion that he doesn't expect Nevada regulators to encourage conservation with higher rates. He said Sierra Pacific's comprehensive energy plan rate increase, which he opposes, already has a conservation component in that it has tiered increases so that customers who use more pay a higher percentage rate increase. Customers who use the least electricity won't pay higher rates.

Panelists said conserving energy is the fastest way to make an impact on fixing the broken power market, since adding supply -- through building power plants and distribution systems -- is still at least two years away.

Rigazio said using programmable thermostats, energy-saving lighting and solar screens are popular conservation methods in Southern Nevada during peak-power usage times of the summer.

But Nevada Power officials say the most popular energy-saving program won't be available this summer. An air conditioning load management program, which enables Nevada Power to shut off air conditioners in homes for 15 minutes at a time for a rate rebate, won't be offered this year.

Rigazio said there isn't enough time to ramp up the program this summer, adding that the technology enabling the utility to shut off air conditioners has improved and it would cost about $350,000 to get 3,000 of the units.

In other comments during a question-and-answer session following the panel discussion, Rigazio said Nevada Power doesn't expect to be one of the companies that will build power plants when new production is approved. He said the company will focus on transmission facilities serving the anticipated new independent producers entering the market.

Rigazio also said the company is still anticipating legal repercussions from jilted power plant buyers if the company is banned from selling their power plants.

"I have no idea how much time was spent by those companies preparing for those sales," Rigazio said. "We're expecting legal issues, but that amount is a lot less when you compare it to the cost of purchased power (that the company would have to buy if it divested the plants)."

In another issue, Hay said legal experts are exploring how the state can assure that at least some of the power produced at new plants being built in the state can benefit Nevada and not be exported to California. He said bilateral contracts guaranteeing the routing of electricity to Nevada have to be drafted and water rights for the plants may be the carrot held out to assure that electricity stays in the state.