Power rate-freeze plan unveiled

Friday, April 6, 2001 | 11:25 a.m.

CARSON CITY -- The Senate Commerce and Labor Committee today approved a major compromise plan to freeze runaway electric rates for one year, which would eliminate monthly increases imposed by Nevada Power Co. of Las Vegas and Sierra Pacific Power Co. of Reno.

Gov. Kenny Guinn endorsed the plan.

The proposal would permit the two utilities to file rate increase applications later this year that would take effect in early 2002. The hikes could be as high as 25 percent, though no one is certain because of the skyrocketing cost of fuel.

State Consumer Advocate Tim Hay told the committee the average bill in Clark County could increase about 35 percent from $171 to $232 in the summer of 2002. However, Doug Ponn, an executive of Sierra Pacific Resources Co., said the hikes could be 25 percent.

The agreement was hammered out by representatives of the utilities, the governor's staff, Hay, Harvey Whittemore of the Nevada Resort Association and Fred Schmidt, who was representing the Southern Nevada Water Authority. The deal clears a major stumbling block in the debate over energy during this Legislature.

Sen. Ann O'Connell, R-Las Vegas, said this new proposal gives Nevada Power and Sierra Pacific Power "stability in the market."

Schmidt said there was "no easy out," but companies need the additional revenue to keep operating.

Although the companies won't be able to increase their rates until next year, Schmidt said the reinstatement of a process called "deferred energy accounting" will allow them to borrow money because banks will have the assurance the money will be there to repay the debt.

Deferred energy accounting allows utilities to recoup the increased cost of natural gas to fuel their power plants and to cover higher costs of purchased outside electricity. For instance, Nevada Power must buy 50 percent of its electricity during the summer months from outside sources.

Deferred energy has been a major issue before the Legislature, which is trying to prevent rolling blackouts and skyrocketing costs, which have occurred in California.

Both Nevada Power and Sierra Pacific have been permitted to raise their rates each month to recover part of the higher costs they are paying for fuel. Nevada Power estimates it receives $1 for each $1.69 spent on higher fuel costs. The utilities were allowed a 17 percent average increase as of March 1.

Those rates will remain in effect, but there will be no more raises. Under Assembly Bill 369, which also stops the sale of the generating plants by the utilities, Nevada Power in October will be able to file an application of a general rate increase with the state Public Utilities Commission.

In December it would be permitted to file a deferred energy case. Both of these would be decided by late March by the PUC. The applications by Sierra Pacific, which serves Northern Nevada, would be decided by May 2002.

In the past, the utility was able to collect on increased costs over one year. Schmidt said the present plan allows the PUC to spread the higher costs over three years to avoid "rate shock."

The bill also puts restrictions on plans by Sierra Pacific Resources, the parent company of the two utilities, to buy Portland General Electric.

If Sierra Pacific purchased the Portland company prior to July 1 2003, deferred energy would be abolished so that no Nevada rate payer dollars would go toward the deal. Any purchase would have to be reviewed by the PUC, which has not had authority in the past to oversee this transaction.

Assembly Bill 369, expected to be ready for final passage in the Senate next week, would permit the two utilities to file for general rate increases every two years. The companies would be allowed to file for deferred energy recovery every six months if rates varied by more than 5 percent. If they did not, the utilities would have to wait one year to file the deferred energy cases.

AB369 was passed by the Assembly but was amended by the Senate committee. After expected Senate passage, it will return to the Assembly to determine whether it will concur on amendments.