Guinn again calling on Bush administration to act on power rates

Tuesday, Dec. 11, 2001 | 9:42 a.m.

CARSON CITY -- Gov. Kenny Guinn is again calling on the Bush administration to change its energy policy to give relief to customers of Nevada Power Co., who face a more than 20 percent rate increase in electric rates next year.

Guinn said Monday he has written to Energy Secretary Spencer Abraham and to Chairman Patrick Wood II of the Federal Energy Regulatory Commission asking they amend the policies in its price limitation order issued in June.

Nevada Power estimates that $200 million to $300 million of the more than $900 million rate increase request is attributed to the policy of the federal agency.

Guinn said previously he had talked to the White House twice about changing the order. But he apparently did not get anywhere. His letters are the third effort to get the energy regulatory commission to backtrack.

The federal commission decided there should be a price cap on the sale of power. That meant that Nevada Power, when it had excess electricity, could not sell it for more than it cost and use its profits to offset rates in Southern Nevada.

Nevada Power had also entered into dozens of contracts to buy power at a high rate during times of uncertainty. The utility wanted the federal agency to allow the price cap to apply to those contracts, which would mean a savings for the Las Vegas utility.

Guinn said these pricing regulations by the federal agency came about because of the "flawed deregulation efforts" in California where prices shot sky high. But he said, "It appears that the imposition of price caps had the unintended effect of exacerbating energy costs in states like Nevada where utilities secured power in advance of the summer."

The governor said the Nevada Public utilities Commission is examining the purchasing practices of Nevada Power and will determine whether costs were prudently incurred. He said however that the state commission cannot remedy increased rates due to the federal rate caps.

Meanwhile the state PUC is hiring a consulting firm to evaluate the rate request sought by Nevada Power. The commission will sign a $60,000 contract with Synapse Energy Economics of Cambridge, Mass.

Donna Wickham, assistant secretary to the PUC, said the main issue in the case is "whether it was reasonable and prudent for Nevada Power Company to enter into the dozens of power purchase contracts when it did."

In a memo to the state Budget Office, Wickham said Nevada Power "entered into dozens of power purchase agreements during the period of late 2000 through April 2001 at the prevailing market prices, which were at the unprecedented high levels. The market prices fell significantly in the period of May 2001 through the present time."

At the same time this year, the Legislature repealed the law that allowed competition for Nevada Power and its sister Sierra Pacific Power of Reno.

She said many factors will have to be analyzed during this period including the federal regulatory policy, natural gas prices, competitive wholesale market conditions, transmission facilities and operating conditions."